So, this is pretty neat.
Building off of what MarcDK has created...
If you'd like the reply form to drop in below the last child instead of popping up to the top parent comment, as well as change "Reply" to "Reply to this thread", try this:
var lastchild = $(this).parent().parent().children('.children').children(":last");
var lastchildattr = $(this).parent().parent().children('.children').children(":last").children().attr("id");
var targetdiv = $(this).parent().parent().children('.children').children(":last").children().children('.reply');
var continuethread = $(this).html().replace(/comment\-(\d+)/g, lastchildattr).replace('>Reply<', '>Reply to this thread<');
$(targetdiv).replaceWith('<div class=\"reply\">' + continuethread + '</div>');
It looks totally absurd, but this is how it would be done using the TwentyTen theme, which has a commenting nest like so:
<ol class="commentlist">
<li class="depth-1" id="li-comment-1">
<div id="comment-1">
(all that comment's data and divs)
</div>
<ul class='children'>
<li class="depth-2" id="li-comment-2">
<div id="comment-2">
(all that comment's data and divs)
</div>
</li>
</ul>
</li>
</ol>
Because comment_reply_link is a little silly in that it will dump empty divs where the reply link should go, we can take advantage of this and replace it for the last child.
Remember, this is only for comments with one level of threading (depth 2).