Quotes and punctuation

Okay, when you are writing speech and your character quotes something, where does the ending punctuation go? And do you capitalise the first letter of the quote? Example:

!) "You know what Linda is always saying about you, Rachel – 'Why must everything you do involve writing?'!" said Ada.

@) "You know what Linda is always saying about you, Rachel – 'Why must everything you do involve writing'!" said Ada.

£) "You know what Linda is always saying about you, Rachel – 'Why must everything you do involve writing?'" said Ada.

These are the only ways I can think of for now that one might punctuate this sentence, but which is right, if any?

I think it's like this:

"As a wise man once said, 'Live long and prosper.'" Single quotes inside double, punctuation inside both.

Maybe in your sentence it'd be better to use a colon instead of a dash, but that might be six of one and half a dozen of the other. It seems a little odd the way you have it now, because if Linda's talking ABOUT Rachel instead of to her face and we're quoting her word-for-word, she'd probably be saying "Why must everything she does involve writing?" That may just be me.

The lines aren't from any story I've written; I just made them up as a way to illustrate something which confused me. Anyway, thanks for your help! But what about the exclamation mark that isn't part of what Linda says, yet is being added by Ada; it surely can't be in the quote?

The sentence structure is awkward. Try this:

"Rachel, you know what Linda is always saying about you--'Why must everything you do involve writing?'" Ada said.

That's much easier to read. And it's hard to intone copying another person who is asking a question with another inflection on top of it. So it's either a question mark or an exclamation mark because the person speaking is parroting the other person.

That makes sense – thank-you!