My initial reading of the demoralize function, and the fact that "demoralize" is called out as a separate function of the skill, leads me to the following conclusion (which I'm not thinking other people have arrived at):
"Demoralized" is, in effect, a condition. The game consequences of that condition is that the given character is "shaken."
If that character is already shaken, they would become frightened, but my read would be that you can't demoralize someone once they have been demoralized (granted, if they loose the shaken condition, they aren't demoralized anymore, and you could do it again).
So, just as a function of the intimidate skill, or feats or abilities that allow for uses of intimidate to demoralize, you couldn't just keep demoralizing until someone is panicked and runs from the field.
You could, once someone is demoralized, and thus shaken, then use some other kind of fear effect to make them frightened, but not specifically the demoralize function.
To back this up, someone that takes damage from a lack of water becomes fatigued, and since they are fatigued, something that causes them to become fatigued would make that character exhausted, but if that character takes more damage from a lack of water, they don't become exhausted.
So, this is my reading, but I've clearly seen other readings of this. I'm curious if someone "official" wants to chime in on this and put it to rest, or to see what the reasoning is behind being able to demoralize someone more than once.