Hello Nick. First, thank you so much for your detailed answer.
This example has the additional problem of the apostrophe in "let's", which
basically causes more mayhem. Let's simplify the example a bit by considering
She said to me: "Rick screamed, 'let us go together'"
which when export to TeX becomes:
She said to me: ``Rick screamed, `let us go together'''
and TeX misinterprets the three closing single quotes as (closing
double quote, closing single quote) instead of (closing single quote,
closing double quote).
I was beginning to suspect that, I didn't see it at first, but after writing and explaining the problem, it dawned on me that it could be LaTeX that cannot correctly parse the three consecutive single quotes.
>
> Internal
>
> In this case, the internal single quotes are rendered correctly, but the closing quote is not converted into its "smart" version.
>
> If the nested quotes are in such a way that there are other characters between the quotes, that is they are not together at the start or the end of the quote, they get rendered correctly.
I'm not sure whether smart quotes can be made smarter, perhaps by
detecting the problem and inserting the small space \, to resolve the
ambiguity; but the manual space solution should have worked: what
version of org are you using?
FWIW, mine is latest master: Org mode version 9.1.2
(release_9.1.2-84-geeaf9a @ /home/nick/src/emacs/org/org-mode/lisp/)
I am using Org mode version 8.2.10, I will update my version and try again.
Martin