With the 'write only to the document directory' policy, the embedding of arbitrary file will at least do no harm. Whether or not we want this feature is still subject to debate.
It appears to me that most developers want to have an at-home feeling with external files, so I am proposing an 'Automatic unbundling' rc preference. This should work like this, 1. This option is by default set to true. 2. When an embedded file is opened, a dialog is shown, with something like "This .lyx file contains embedded files, you have the options between A. Extract to blah blah (the current directory, this is the default button). B. Extract to another location (users can browse for a directory, and the files will be unbundled there) C. Edit in bundled mode. 3. In case A and B, embedded files will be extracted to a directory and blah.lyx from that directory will be opened. 4. If "Automatic unbundling" is set to false, lyx will edit in bundled mode until a user selects unbundle from the document menu. There is one problem here: if we allow extraction of files, including blah.lyx to where blah.lyx (embedded version) locates, the embedded version would better have a different extension such as .lyz. Otherwise, this file will be overwritten unless we extract blah.lyx (text version) as content.lyx as what we are doing in the temp directory. Bo