Well, by default, a maximum of 400 characters are quoted and nothing is quoted when the reply is close to the post replied to. So I think it’s not that bad. And every administrator can decide for themselves what suits their community. I agree it may not be suitable for many, but for me that’s what theme components are for. Those who need something can use them.
Did you change any of the component settings? As Nate said, by default, it only works when you reply to a post where 3 posts are below. Do you use the Markdown mode of the composer?