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First part is to create the parent object, which works just fine. But the sencond part to create the child object doesn't seem to work. If I take the easy way, that is, creating othere ZClass on the top of the products folder of Control Panel, I can do it. But I don't think it is a good desing from the perspective of OOP....

Nope, but it won't work right now (there were some threads on this on the main Zope list recently). If you want my advice: do not nest ZClasses, or you'll find yourself redesigning your product sooner or later :-(

Could any one of you have solution to this, so that I can keep the Class Hierarchy as above and create the object nested?

No, make a flattened design. My 2 cents (eurocents that is) Rik