One issue (apparently a feature) that may arise is that, if application is rejected in consular proceeding, the applicant is locked out from usa. AFAIK, if someone applies for an immigration visa in usa, they will not be able to obtain non-immigration visas in the future. A refused green card application might be the end of being ever in usa. The person may have to truely exit USA since there may be no way back (close bank account, sell property and assets, etc).
If the person adjusts status in usa, there are more possibilities for appeal etc.
> they will not be able to obtain non-immigration visas in the future
Why? Aren't L1 and H1B "dual intent" visas?
Yes, this is a feature. I don't think non-immigration visas actually exist, or can in principle actually exist until there are massive legal and constitutional changes in the US up to and including ganking the birthright citizenship clause of the 14th amendment. Anyone who sets foot on US soil for any reason - even illegal immigrants, let alone people on a legal, ostensibly non-immigrant visa - can try to adjust their status, and has lots of "possibilities for appeal".
The US government should not give permission to anyone at all to set foot on US soil, unless the mass of existing citizens of the US are comfortable with that person eventually voting as a citizen on what the composition of the government should actually be. And as a US citizen, I am not comfortable with letting the vast majority of people in the world - many of whom are scrambling for any legal opportunity at all that will let them legally reside in the US - vote for the government that passes laws that affect me.
The end result is the same though. If your application is rejected in the US, you could stay while you appeal, but if you're ultimately rejected then you have no choice but to re-apply through consular processing anyway once your status runs out. Good if you have a job in the US, but you're kicking the can down the road.
> A refused green card application might be the end of being ever in usa.
Do you have evidence for your other claim? The main thing you need to prove for a non immigrant visa or VWP is that you won't overstay or have intent to immigrate at the time of application and upon entry. Otherwise it's up to the consular officer like usual. You would need to declare the refusal/denial of course.
What will get you denied is "inadmissibility" if you don't submit a waiver. If you're inadmissible that usually means some serious violation and you've got other problems.
As far as I know, people have been successful in re-applying for EB green cards after being rejected when they've assembled a better packet.