Mr. Tea
Let's Talk About Ceps
I read a nice book by him this year, By night in Chile, which is quite short, almost a novella really, but it uses this technique extensively.Bolano also has a lot of his characters telling stories to one another. the one i like is the one where you've got someone retelling the orestia late at night. also the nightwatchman and the old guy having their conversations. can't remember the names of the actual books sorry
Ought to read some more Bolaño, it's good stuff.