This is expected. Basically, there's no such thing as particles of particles.
The particles being rendered on Torus are instances. They aren't full copies of Cube. They exist in a weird, not-quite-a-mesh-object realm where they have tons of shared data with each other. The cubes aren't really part of the Torus object. Torus creates them, but if we reference Torus with a modifier, we're not getting all those Cubes. When you use Torus as a particle, Torus itself is also an instance-- but instances don't themselves generate instances.
So, why, when we convert ParticleSettings modifier, which references the Cone (not ParticleSettings.001, which references Torus), do we get a bunch of Torus objects, now with their own Cube particles? Basically, because Blender doesn't expect you to use multiple particle modifiers on a single mesh. It expects you to use a single particle modifier, and if you want to render multiple objects, it expects you to reference a collection (in earlier versions, a group) which contains those objects. So when you turn all those Cone instances into actual Cones, it also does it with all the Tori. It's a bug. Not a very important one, because it's right, that's usually what we do, and if we see this bug, we go, oh, I should probably just have a single particle system instead. (But you'd be justified in putting it on the bug tracker. I'm not really inclined, I'd rather save my social capital for something more important to me.)
And all those Tori now have cube particles, because all of a sudden they're no longer instances, they're actual objects, and actual objects can spawn instances. That's what Convert does, turns instances into objects.
What if you want all those cubes? Well, first, I wouldn't recommend it, because it looks like it causes some pretty massive slowdown. But for this particular example, you can convert the particle system on Torus, and then join all the Cube objects it spawns into Torus. Then, Torus's geometry will include all those Cube particles. That will work here, where we're not doing anything dynamic.
Are there any imaginable, similar situations where that won't work? Yes, there are tons. All we have to do is think about Cube as part of an emitter system, and then conversion won't be a good solution. For a long time, there simply weren't good solutions here. But recent improvements in Blender have given us geometry nodes, which allow us to do very similar things to particles, and instantiate the instances (make them real geometry) via the Realize Instances node. That will let you solve an awful lot of particle problems like this. (Probably not all problems. I can't imagine how you could ever get boid particle behavior, as a particle with a particle. Or particles-of-particles that reacted appropriately to physical forces.)