The base phpBB implementation pulls a quoted post in its entirety, including images. I modified it to replace images with
<image> and reduce the amount of quoted text to the last section if there's lots of quotes one after another. It's an imperfect solution to discourage huge quotes (as a usenet oldtimer, you know the problem -- someone quotes two pages of text to add "Yes, I agree"

) and word parsing. The new version of phpBB also has an option to limit embedded quotes. They're not overly popular (e.g., CG has never had them). Embedded quotes also increase the number of formatting errors because posters neglect to preview their post, otherwise they'd see that they've omitted one or more terminating [/quote] tags.
For those who are forum savvy, an easy workaround for the limit on embedded quotes is to serialize them.
I modified the post you linked above to follow this format.