I'm having a similar problem with Firefox and the "outdent" button. If some of highlighted text is already 'all of the way outdented' and some is not, I get the following popup error:
Command 'Outdent' Error : Component returned failure code: 0x80004005 (NS_ERROR_FAILURE) [nsIDOMNSHTMLDocument.execCommand]
I assume this is a stack overflow since that errorcode can mean "Stack Overflow" according to Google.
It can mean a lot of other things too. :(
edit: I can't get this error to happen on the example page.
-m