It maybe a function of where you're rendering the Dialog and
SimpleDialogs to. [e.g. are you rendering both to document.body or in
elements nested further down].
The following example may help (which uses the hideMask event as you
mention to provide nested modality support):
It renders both dialogs to document.body which is recommended if you're
using modality [ http://developer.yahoo.com/yui/container/panel/#config
], to avoid having to wrestle with stacking contexts.
Hope that helps,