What is the best way to modify a list in a 'foreach' loop?

Make a copy of the enumeration, using an IEnumerable extension method in this case, and enumerate over it. This would add a copy of every element in every inner enumerable to that enumeration.

foreach(var item in Enumerable)
{
    foreach(var item2 in item.Enumerable.ToList())
    {
        item.Add(item2)
    }
}

The collection used in foreach is immutable. This is very much by design.

As it says on MSDN:

The foreach statement is used to iterate through the collection to get the information that you want, but can not be used to add or remove items from the source collection to avoid unpredictable side effects. If you need to add or remove items from the source collection, use a for loop.

The post in the link provided by Poko indicates that this is allowed in the new concurrent collections.