Reactive data inside reactive regression function

It's most likely not related to reactives inside reactives but current input and/or ds() states.
Have you tried debugging input$inVar, input$inVar1 and ds() in a similar way as suggested yesterday - How to get the statistical summary of a reaactive dataset - #2 by margusl - adding few observers to track reactive values?

server <- function(input, output, session) {
  ...
  observe( str(ds()) )
  observe({
    print("input$inVar:")
    str(input$inVar)
  })
  observe({
    print("input$inVar1:")
    str(input$inVar1)
  })
  ...
}

It would help others to help you if you'd share bit more of your app, for example we do not really know what UI controls are you using for inputs ( input$inVar* ) or how and when is ds() invalidated.
It would be ideal if you could include a minimal reproducible example that includes a complete yet minimal runnable Shiny app (including ui & server objects, all required libraries), just enough for others to reproduce your issue.

For what it's worth, a more or less minimal (though working) example could look something like this:

library(shiny)
library(bslib)

ds_lst <- list(mtcars = mtcars, iris = iris)
ui <- page_sidebar(
  sidebar = sidebar(
    selectInput("ds", "Dataset", choices = names(ds_lst)),
    varSelectInput("var1", "Response", mtcars),
    varSelectInput("var2", "Regressor", mtcars),
    actionButton("fit", "Fit")
  ),
  card(verbatimTextOutput("txt"))
)

server <- function(input, output, session) {
  ds <- reactive(ds_lst[[input$ds]])
  
  # use action button to trigger model update
  model <- eventReactive(input$fit, {
    # varSelectInput returns symbols, so we can use those directly with 
    # rlang::new_formula()
    f_ <- rlang::new_formula(input$var1, input$var2)
    m_ <- lm(formula = f_, data = ds())
    m_$call$formula <- f_
    m_
  })
  
  observe({
    # update select inputs when ds() changes
    updateVarSelectInput(session, "var1", data = ds())
    updateVarSelectInput(session, "var2", data = ds())
  })
  
  output$txt <- renderPrint(summary(model()))
}

shinyApp(ui, server)
Screen rec

chrome_2IJHlWg90M