But freknu, do you understand that sentence? I don't. As a syntactician I can analyze it as grammatical and maybe jot down some notes to keep up then eventually translate it into real English... but I can't process it. It's possible that if you pronounced it with just the right intonation I'd be able to follow, but I think that's going to be tricky

The distinction is between
competence (where deep embeddings like that are
grammatical) and
performance (where they are
unacceptable and/or
incomprehensible). (Many linguists make that distinction, on the assumption that there is a difference between what we know and how that translates into usage/behavior. Some would say that any sentence we can't use is ungrammatical, though and that everything is just performance.)
So the explanation is that while syntactic structure is infinitely recursive, after a few levels, in some cases, we lose track of what's going on and get confused.
The classic example of this is
center embedding as exemplified by:
The cat ran.
The cat the dog chase ran.
?The cat the dog the rat bit chased ran.
???The cat the dog the rat the bird saw bit chased ran.
...
In fact, I think I saw experimental evidence that speakers
prefer this sentence on first glance:
The cat the dog the rat bit ran.
It's actually ungrammatical, because there aren't enough verbs for the subjects, but we're terrible at parsing deep center embeddings.
The question then is: why is there a limit? Is there a limit to grammatical structure? You can only embed twice? three times? Or is there some limit to our processing ability. Generally it's attributed to the latter, although some would argue it's strange to say that we could potentially parse 100 levels of embedding "in theory", saying there's some actual limit to grammar. Interesting questions there.
One argument I've heard (recently mentioned to me by a colleague) is that this may be working memory-- we can only remember so many things, and center embedding makes you remember more things-- the cat, the dog, the rat, the bird...-- and at some point we will get lost. But other kinds of sentences allow you to package the information together (such as conjunctions-- "the cat and the dog and the rat and the bird...") so you won't get as confused, just using one unit of memory for the whole thing. So the argument would be that the grammatical structure "forks" sometimes and that means you're using more memory, and sometimes merges back together, at which point you're using less. If you reach the maximum (perhaps 4 units of memory or so) you'll get confused.
Now, on the other hand, there are also some specific restrictions, sometimes called or including "island constraints", on what can be questioned one. So that isn't about "only two" but about the specific meaning of the adverbial being questioned. Consider this odd sentence:
How did you wonder [whether] I would fix the car?
Can "how" refer to the embedded clause? vs:
What did you wonder whether I would fix?
In that case, it depends on the structure, not levels of embedding (though embedding, at all [but not counting levels], could have an effect).