Signed up just to say that I've also really, really wanted such a tool since forever. While for example the Jetbrains IntelliJ family of editors has the automatic "inline function" refactoring, they do it by permanently modifying the source code, which is not quite what we want. Like you say, it should be transient!

So I recently made a quick&dirty interactive mock-up of how such an editor feature could look. The mockup is just a web page with javascript and html canvas, so it's easy to try here: https://emilprogviz.com/expand-calls/?inline,substitution (Not mobile friendly, best seen on desktop)

There are 2 different ways to show the inlining. You can choose between them if you click the cogwheel icon.

Then I learned that the Smalltalk editor Pharo already has a similar feature, demonstrated at https://youtu.be/baxtyeFVn3w?t=1803 I wish other editors would steal this idea. Microsoft, are you listening?

My mock-up also shows an idea to improve code folding. When folding / collapsing a large block of code, the editor could show a quick summary of the block. The summary could be similar to a function signature, with arguments and return values.