So, you are quite literally using this WooTheme?
Where they have a support place already on their site?
We can't really see if you have a theme problem without having access to the theme. It's probably best to ask the guys over at WooThemes to help out with this.
These two things are the only settings you should need:
Allow people to post comments on the article = checked
Enable threaded (nested) comments 5 levels deep = checked
Which you've checked. So, now it might come down to a theme issue.
Two things you can check:
1) Deactivate plugins to see if there's a conflict.
2) Switch to the Default theme to see if it works.