MacBook – Attaching external display to MacBook Pro through VGA → DVI → Thunderbolt

The Apple mini-DisplayPort to VGA or HDMI adapter terminates the Thunderbolt chain where it is connected, so until Apple released new MacBook Pro with two Thunderbolt ports (similar to the iMac that has two ports) then you will only get one video signal from the device through the Thunderbolt port.

You may find an inexpensive USB to VGA solution to get around this limitation. Initially they were slower, but the newer ones are getting much faster and the software much better. You can then put the most important content on the Thunderbolt port and have the secondary display served over USB.

Should a Thunderbolt adapter come about that drives two displays, I'll update the answer, but nothing has been released (or even rumored) even though it's clearly something the protocol could support.

I like this knowledge base article for the clear deprecation of which Macs support two Thunderbolt displays and which ones only support one.

• Apple Thunderbolt Display (27-inch): Connection options for Thunderbolt Macs

No. DVI-D only carries digital signals. Most (if not all) DVI -> VGA converters use the analog signal DVI-I carries. A mini DisplayPort to DVI connector will only pass on digital signals (as you correctly identified by referring to it as a DVI-D signal), so your DVI to VGA adapter is left out in the cold. You need to get a mini DisplayPort to VGA adapter.

The reason the computer sees the display is that one of your adapters is identifying itself as a display.