Aha ok yeah I see exactly what you mean now about the note refactor plugin. As a former dev myself I would think the solution from a programmatic standpoint would be for the plugin to (1) check if the selected content contains a ^block-id and if so (2) find all instances of that block ID in the vault and update the links that contain them. (1) is pretty trivial, but changing the links in part (2) could possibly be more tricky.
For highlighting, I’ve experimented with an app that may or may not help you, called Highlighted. It lets me select passages in physical books and OCRs them, lets me tag them, and lets me group them together and attach the page number as well, then export to text or Markdown or PDF. The end result is a large block of text similar to what you describe but I think it is broken down into sections a bit more, because I can essentially pre-chunk a bit in the app. It also lets me type in notes along with the highlights and keeps them in the output.
Example from Ahrens book:
p. 65
It is not only impossible to a focus on more than one thing at time, but also to have a different kind of attention on more than one thing at a time.
…
When it comes to focused attention, we focus on one only, something we can sustain for only a few seconds.
…
Focused attention is different from "sustained attention, which we need to stay focused on one task for a longer period and is necessary to learn, understand or get something done.
#term
I make no claim the page numbers are correct – it tries to automatically assign page numbers and seems to use the kindle or a pdf version which is usually off a bit, and this is where its my turn to be lazy and not bother updating it! 
The ... (which I manually add as free-text notes in the highlight group) signifies that those are multiple highlights I captured from different places in the book (usually quite close together) and assigned to a single “note” in the app, all attached to the same page (again, maybe the wrong page ¯\_( ツ )_/¯).
The Focused attention is different ... at the end is my own free text note added in the Highlighted app, included in the exported text. #term is a tag I created to denote defined terms in the extract. The app supports tagging as a first class construct.
The ability to add my own notes directly in the same group allows me to also add notes like these, which are attached to another single group of highlights:
N) New ideas must overcone existing rotines to tale hold
N) Silo busting optimizes flow
N) innovation created hidden second order benefits
These were conceptual evergreen note or lit note titles I thought of while extracting the highlighted content so I just typed them directly in the app into the highlighted note as free text. Just to jog my memory when I process it after extraction. They may or may not make the cut when processing.
One weird bug seems to occur though where sometimes the passages in a section with multiple highlights (the ... stuff, which I manually add between captured highlights in a chunk in the app) are sometimes jumbled out of order which is annoying. Not sure what the issue is there.
Also as it is OCR it isn’t perfect and sometimes makes some annoying mistakes that need to be corrected.
But it does seem to be a useful tool, though I haven’t used it much just yet. I’ll take a look at Readwise as well, but you may find Highlighted useful as well.
Thanks for the explanation!