In broad terms, you need two things to ensure that the theoretical rebar won't pull away from the theoretical concrete before it yields:
#1) The bar should not slide out from the concrete in which it is embedded by way of bond stress failure / local concrete splitting.
#2) A chunk of concrete should not separate from the main body of the parent material and come away with the rebar.
So far, this ought not be fodder for debate. It's just statics. So, analytically, how do we make sure that #1 and #2 don't happen? Like this:
#1) We embed our bar by a development length and;
#2) We employ some calculation procedure to assess concrete breakout.
So, in my opinion, bar development is necessary, but not sufficient, to ensure that our hypothetical reinforcing bar can be stressed to yield before initiating a concrete breakout failure. This makes sense to me for a couple of reasons:
1) If development were sufficient on it's own, then it would be sufficient for all cases where the code definition is met, including situations with small edge distances etc. And we all seem to agree that concrete breakout will be an issue where edge distances are an issue. For what it's worth, my understanding is that
2) As shown in the test setup sketches that I posted above, the testing for Ld involves a concrete strut that the bond stress forces can push back against. As TXstructural pointed out, development length was never intended for situations where the bond stresses would push against a free edge.
I too have long been frustrated with the lack of an Appendix D provision for cast in rebar used as anchorage devices. The ACI 318 provisions on post installed adhesive anchors are coming tantalizingly close. In Eligenhausen's book, which was the primary source for the 318 App D provisions, he explicitly differentiates between situations where concrete breakout applies and where development length is the name of the game (snipped below).
For what it's worth, my understanding of Eligenhausen's work is that bond and concrete breakout are both incorporated into the Appendix D. As such, it's debatable whether or not it's even appropriate to be using the term "development length" in the context of our problem in this thread. In this situation, bond and breakout are inextricably intertwined. This is consistent with Precast78's intuition that a 35deg cone emanating from the bar end might not be "fair".
I like to debate structural engineering theory -- a lot. If I challenge you on something, know that I'm doing so because I respect your opinion enough to either change it or adopt it.