Hi @chanhalzkie,
You are just able to add simple products, the variable or exactly variation to the bundle ( https://prntscr.com/nbonx2 ), but you can’t make the bundle work as a variable product or add a bundle inside a bundle.
Even if you can search for and add them in the back-end, but in the front-end, they won’t be visible or functional as normal.
In order to add extra items to a Smart Bundle, you can use WPC Frequently Bought Together or WPC Force Sells plugin. After installing these plugins, users can add extra products in the Bought Together tab or Force Sells tab.
Regards,