I often have to fight to get people not to expose huge amounts of state whenever they build a module, so by far the most common bugs that I see are people being too loose with turning things that really shouldn't be modules into very fragile, cumbersome modules that depend on being used only in specific (undocumented) places with specific (undocumented) setup.
If I was in the opposite situation, and everyone I worked with already inlined code all the time, then probably most of the bugs I'd see would be related to people reusing variables, abusing hoisting by making spaghetti references to variables that are defined later in the function, etc... and in that case I could definitely see myself agreeing with you.
I have on occasion wanted the ability to define an anonymous function that didn't inherit variables from the scope that it was defined in. So I'll give you that - I would love for the ability to make an anonymous function that only has access to variables that are explicitly passed in. If I could isolate variables going into a closure as easily as I can isolate variables going out, I suspect a lot of the problems you're talking about would be easy to solve.
I’m not sure how we could objectively decide if either of these two approaches is definitively better, but in the specific, restricted case of a framework like Scalding, I’d strongly wager that avoiding in-lining ends up better in the long run. Those cases also have little connection to the weak module design issue you brought up, since it’s usually a module with de facto map reduce boiler plate and then just a few isolated places with any actual implementation, and when those parts are expressed as huge in-lined anonymous functions inside Scalding data type wrappers, I know right away it’s a bad code smell.
The correct approach might just be the opposite of whatever you and your team's predilection is. In your case, you're saying that the teams you work with are using inline functions instead of following a restricted framework, in part because they're using languages that encourage them to just slap a bunch of nested code in instead of writing out the extra boilerplate.
Well, they probably already know to be careful about module design -- so if you encourage them to inline less code, odds are pretty good you won't suddenly wake up in the morning with a codebase with a hundred classes and a bunch of obscure private/public methods named `setupEntityExtractorForCollisionPart3`.
On the other hand, if your team is coming from a Java background and half of them are starting from the position that lambdas are just witchcraft, then it's probably not a bad idea to get them over that fear.
In a setting where everyone is inlining most of their code, probably the tests that are coming out are all integration tests, so... yeah, bias towards creating units so you can unit test. In the opposite situation, I'm actually just trying to get people to stop testing private methods and leaking implementation details into their tests. So I would love if people were testing with a little less granularity.
I know that my initial reaction to you listing off the problems you've run into with people building anonymous functions that couldn't be refactored was just, "yeah, but why the heck would anyone make that mistake? How hard is it to organize the variables in one function?" So I assume that other people might listen to my complaints about improper code reuse and think, "yeah, but why the heck would anyone ever just reuse a method in a class without checking the documentation first?" So my takeaway from that is, "different people struggle with different things."