Yes I think so, the grenades, within the crate that gets blown up by a grenade, would explode as well, making the crate a pretty hot place to take cover. And like you said, it would be for the better if the explosives crate appearance was different from the usual weapon crates, you'd know it'll blew up pretty extensively if in touch with explosion and you'd know which crate would give you grenades if you brake it using the knife.

But how should it look like?, I mean, they don't want to make the enemies shoot it by making it too obvious that it's filled with explosives, nor do they want to let their soldiers get close too it as if it was a normal crate.
Maybe a red flame sign? or a "Warning!" tape?

Are you sure you haven't changed the vulnerability behind crates in 0.35? I have just succesfuly survived two whole M240 mags, standing behind a crate, then got boned when the machinegunner smoked me out of the cover by a grenade. Maybe I was just insanely lucky not to get shot behind a crate so far.

Explosive crates sound like a fun idea to me, and open new possibilities what to add later in the game wich is always great (C4 anyone?).

I approve of this.

Well, given the fact that, with a hand grenade, the damage inflicted is mostly not from the (small) explosion, but from the shrapnel it generates. A grenade is set off by the heat from its fuse, which is set off by the spoon being released, which is set off by the pin being pulled. Soooo, for a grenade to set off another grenade, a piece of shrapnel would have to damage it in such a way that the pin is released or the spoon is sufficiently damaged.
Now, this is the situation for frag grenades, which I assume are the ones in-game. Concussion grenades, on the other hand, are designed to take out enemies with the force of their blast alone, so I'm not sure if they can set off other grenades.
Just mah thoughts on this situation.

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There's some things you just can't control in life...that's what telekinesis is for.

Yes, I'm sure I haven't. The crate is so small that the soldier can't duck properly behind it, let alone stand, hence I'm dying quite often behind it and so are the AI soldiers. Quite often means not-always, they do work for cover some bit. Maybe I just don't know how to position myself properly

But, it's a.. game, and stuff happening in chain are fun and can cause mayhem

So we leave it a explosion chains and leave that part of realism out.
Sounds good to me.