The term for the second kind of embedding is center embedding, by the way. It’s got nothing to do with whether prepositional phrases or tensed phrases are involved; the issue is whether the embedding occurs at the edge of the phrase or, as the name suggests, in the center. Unfortunately, I’m not familiar with the literature on that, so I can’t tell you what explanations have been proposed for why it’s harder to process. But this is the term you’ll need to Google for.
The term for the second kind of embedding is center embedding, by the way. It’s got nothing to do with whether prepositional phrases or tensed phrases are involved; the issue is whether the embedding occurs at the edge of the phrase or, as the name suggests, in the center. Unfortunately, I’m not familiar with the literature on that, so I can’t tell you what explanations have been proposed for why it’s harder to process. But this is the term you’ll need to Google for.