There have been 2 ways to add sub-menu items to the panel: (1) drag and drop - that appears to have gone for good, (2) a sequence of actions (see below) which should still work, but which has "bugged out" in cauldron - there is an
open bug on this issue since november.
(2) should work if the following steps are done
1. do an "unlock widgets"
2. pop up the desktop application menu (using the classical kde menu)
3. navigate with your mouse (just move, no click) in the launcher menu and its submenus
4. when the pointer is over the desired sub-menu item, do a right click
5. you get a popup menu where you can select "Add to panel" (that is what you want) or "Add to desktop"
As a consequence, a popup-launcher icon will be added in your panel. When the bug appeared (transition to kde4.7), hitting this launcher just produced an error message. A recent update (Kde 4.8.2) brought some improvement: hitting the launcher really pops up a sub-menu, but not the one you want.
If you are willing to do a little bit of hacking, you can obtain the correct behaviour by editing .kde4/share/config/plasma-desktop-appletsrc, this is quite easy: you have to correct the "relativePath=..." line in the item that defines the popup menu - quite easy to do, but I do not want to clobber this reply by technical details - say if you need these details.
I also have a script, that automatically adds a set of submenu launcher icons to the panel (i.e. an icon for each top-level submenu of a custom menu added by the user with kmenuedit) and that is a workaround to this bug. Might be of some common interest, but would need some smoothing for use elsewhere (and an alphabetic sort could easily be done - however, I prefer to fix the sequence by the sequence in which I add submenus with kmenuedit)
PS: I had quoted a wrong bugzilla reference initially, is now corrected