It took me while to work out I could hide embedded images using an attachment folder.
Now I wonder if I can hide the attachment folder by calling it .attachments?
I ask because I named it like that but next time I opened that vault it had vanished from the side bar and the links from files in it were broken.
Is there a best practice for keeping the attachment folder out of the way?
No, it’s not possible to use a hidden folder for this. As you said, Obsidian won’t be able to see it. You can try to hide that folder from your file explorer using css.
This is really unfortunate. Obsidian can’t auto-create these attachment folders either so the feature is pretty useless.
I don’t think creating a folder is that big of a deal, and for the record not all of us want the attachment folder to be hidden, so I don’t think labelling this “useless” is fair. That being said, you are welcome to open a feature request if you want this.