There is another possibility (compromise): 1. we keep original file information (that would store in the plain-text .lyx file) so that we can easily locate the external counterpart of an embedded file. This would require a manifest file unless the 'not-within-document-directory' problem can be resolved.
2. we remove the AUTO feature so embedded files are always embedded. 3. we provide easy access to something like 'update from external file(s)' to individual or all embedded files. This of course requires 1. I can live with such an embedding feature with 3. The implementation would be (much) easier than my AUTO implementation. Cheers, Bo