yeah, unfortunately it is. At present it uses the same threading algorithm as twitter does, namely: if there's an @username in a tweet, assume it's responding to the last tweet of that user. I may look to do something smarter down the road.. we'll see.
Time decay might be a factor, but I think you'll get better results than making everything be a reply to the last update from that user. Once you find out what the magical N number is you can throw that in as well.
