layout – How to organize nested groups of forms where a user can just keep adding to them?

As far as I understood, user may have many records and for many records scenario, tabular structure is very useful (your second option).

At first, you will have empty table of records and in above toolbar there will button to create a new Project service. On the button click, you can open a pop up(I assume Project Service Table is not opening in pop up already).

You can provide drop down to Service and other fields on that pop up window. For Breakdown option, you may have editable table where + sign to add Breakdown and – is for removal. Also,one save button at the bottom of pop up. Once, you save the record, it will be displayed as first row in table.

On edit mode, you can populate same form with all values.

For your reference:

Manage Page for list all your Project Service. Give Add/Edit/Delete buttons at the top of this table.
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When create, the pop up should open with this kind of form.
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Sample for breakdown table inside above window as other form item:
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Hope, you will get the idea. Thanks.