"The way I would do it is to push the processing out to functions, too."
This is indeed a good idea to isolate code away, but wouldn't alleviate a deeply nested control structure. It would make it somewhat more easier to look at, though.
"I'd advise against running returns onto the same line "
I usually follow PEP8 and place returns and continues on the next line, but the code examples I posted earlier had to be a bit condensed to conserve screen space, that's why ;-)
Sometimes your problem space is really just that complex, in which case there's not much you can do, short of writing some sort of business rules engine.
