Nested parameter expansion: Why is ${foo%"$bar"} legal, but ${$bar} not? - bash

Question

I'll start with the two motivating examples, to give proper context for the question, and then ask the question. First consider this example:
$ ext=.mp3
$ fname=file.mp3
$ echo ${fname%"$ext"}
file
Evidently, in parsing ${fname%"$ext"}, bash first expands $ext into .mp3, and then expands ${fname%.mp3} into file — the last step follows trivially from the definition of % expansions. What's confusing me is the expansion of $ext...
In particular, let's compare the above with this similar example:
$ a=value
$ b=a
$ echo ${$b}
-bash: ${$b}: bad substitution
Of course, I know I could use "indirect expansion" here to achieve what I want:
$ echo ${!b}
value
But that's not relevant to my question. I want to understand the specific bash evaluation and parsing rules that explain why ${$b} fails but ${fname%"$ext"} succeeds.
The only relevant passage I've found in man bash is this:
The order of expansions is: brace expansion; tilde expansion, parameter and variable expansion, arithmetic expansion, and command substitution (done in a left-to-right fashion); word splitting; and pathname expansion.
But I'm not seeing how the different behaviors result from these rules.
I'd like see an explanation that explains each step of the evaluation process of the two examples, and the rule underlying each step.

Answer 1

If you look up ${parameter%word} expansion in the bash manual you'll see that parameter and word are treated differently. word is subject to pathname expansion while parameter is not.
${parameter%word}
${parameter%%word}
Remove matching suffix pattern. The word is expanded to produce a
pattern just as in pathname expansion. If the pattern matches a
trailing portion of the expanded value of parameter, then the result
of the expansion is the expanded value of parameter with the shortest
matching pattern (the % case) or the longest matching pattern (the
%% case) deleted. If parameter is # or *, the pattern removal
operation is applied to each positional parameter in turn, and the
expansion is the resultant list. If parameter is an array variable
subscripted with # or *, the pattern removal operation is applied to
each member of the array in turn, and the expansion is the resultant
list.
That seems like it would explain it. But it doesn't. Pathname expansion only means globbing and pattern matching with *, ?, and the like. It doesn't include variable expansion.
The key is to read up. There's a preamble that applies to the above:
In each of the cases below, word is subject to tilde expansion, parameter expansion, command substitution, and arithmetic expansion.
In totality, word is subject to all of these expansions. Key to this question: $ext is expanded via recursive parameter expansion.
I say "recursive" because it can in fact be nested arbitrarily deep. To wit:
$ echo ${fname%.mp3}
file
$ echo ${fname%"$ext"}
file
$ echo ${fname%"${ext%"$empty"}"}
file
$ echo ${fname%"${ext%"${empty%""}"}"}
file