None of this is relevant to the CAGED system though. All of what you guys are talking about has to do with people not learning their theory properly in the first place. If someone is just learning scale patterns without understanding basic harmony or chord construction then they will apply all of this information incorrectly regardless of the form it is given to them in. The problem with guitar players in general is that they learn everything by rote instead of how musicians on other instruments learn their theory, harmony, accompaniment and improvisational skills. If you teach exclusively via physical patterns a musician isn't going to train their minds ear to hear what they want and how to tell their fingers where to find it and they aren't going to internalize any of this to the point where they own it.
I look at it this way:
1. The student learns the root patterns from all five CAGED positions. ROOTS ONLY.
2. Student learns how to construct a major scale linearly up one string at a time - they learn the landscape of whole and half steps, we talk about what note names to use and whatnot
3. Student learns to construct their own major scales around the CAGED patterns on paper first.
4. Student learns to play each major scale in time with the metronome while reciting out loud the scale degree (not the note names). This works on their rhythm, ear training and understanding of the relationships between notes in the major scale. The verbalization helps the student actually retain the function of each note in the scale mentally.
5. Student pulls the Root, 3 and 5 from the major scale patterns and learns those major triad arpeggios in time.
6. Student plays over a I chord vamp. First hear the major triad notes and then the non-triad notes against the I chord. What notes provide the backbone or structure of the Major tonality? Where will you resolve a phrase to and where what notes don't provide resolution against the chord? This is the starting point to being able to control the "question and answer" component to phrasing.
7. We work in another chord in that key and practice playing phrases that make sense against each chord within the parent major scale using chord tones for structure and the other scale tones for color.
8. pull the 4 and 7 out of the major scale to learn our major pentatonic scales in each position and to see how they relate to the diatonic major scale.
Then we do it with minor scales. By this point most rock and blues players have a pretty good understanding of basic harmony and the CAGED system is pretty much forgotten about as a system of 5 isolated cells. And chord voicing construction becomes much easier in any position because we know where all of the scale and chord tones are around each set of roots. And don't forget the ear training that happens through the process as well.