The current block references stand out as big alien chunks in any document. It’d be better if they felt as if they were part of the document, or at least to have the option to achieve that. If I have inline embeds, then a synthesis of different ideas can be put together without forcing a shape like current embeds do.
This request can be better placed in context by looking at this comment in a different thread.
Was going to suggest exactly this. Yes, this would be great. I currently use the notes refactor plugin a lot, and the result tends to be quite ugly when I chop a larger note into smaller ones. That is especially the case when an embedded note renders at its maximum size, with the text within becoming scrollable.
To avoid this problem, I create copies of the sub-headings as separate notes instead of embedding them. I would have preferred to be able to embed them in-line as OP suggested.