gistfile1.js

$(function() {
  $('select[data-nested-select]').each(function() {
    var select       = $(this),
        groupName    = select.data('nested-select'),
        optgroups    = select.find('optgroup'),
        options      = select.find('optgroup option'),
        groupSelect  = $('<select>'),
        promptOption = makeOption(groupName, null, false);

    groupSelect.append(promptOption);
      
    optgroups.detach();
    optgroups.each(function(index) {
      var optgroup    = $(this),
          name        = this.label,
          children    = optgroup.children(),
          selected    = children.is(':selected'),
          groupOption = makeOption(name, index, selected);

      groupOption.data('options', children);
      groupSelect.append(groupOption);
    });

    groupSelect.change(function() {
      var optionsInGroup = groupSelect.find('option:selected').data('options') || [],
          hiddenOptions  = options.not(optionsInGroup);

      hiddenOptions.
        attr('selected', false).
        detach();

      select.append(optionsInGroup);
    });

    groupSelect.insertBefore(select);
    groupSelect.change();

    function makeOption(text, value, selected) {
      return $('<option>').
        attr('value', value).
        attr('selected', selected).
        text(text);
    }
  });
});