Also made an account just to talk about this issue. It’s currently the biggest issue I have with Obsidian and it’s made me consider other documentation/note options, just because the current syntax means it takes SIGNIFICANTLY longer for me to write notes because I’m busy inserting angle brackets for blockquote markup manually in the XML snippets I’m trying to insert into my callouts–and god forbid I ever try to nest callouts and then insert a code block into that. This, of course, ignores the live preview issues that also pop up with this feature.
However, I did find an acceptable workaround: just use the Admonitions plugin instead. It’s what everyone apparently used before Obsidian’s native callouts, and its syntax is much, much friendlier for this particular use-case than the blockquote-based markout Obsidian uses–editing and copy/pasting code blocks largely just works, whereas doing any of that stuff in the native callouts feature is prone to breakage and formatting issues. And Admonitions works perfectly fine in live preview mode too!
The only thing that sucks about this approach is that the Admonitions plugin is in maintenance mode, probably because it was “superseded” by Obsidian’s native callouts feature. But it’s so much more difficult to work with than Admonitions that I’ll just live with using a quasi-deprecated plugin or think about migrating out of the Obsidian ecosystem entirely.