>> It seems better to handle the temp-buffer setup in the buffer display action
>> functions (currently there are two such functions that handle temp-buffer:
>> 'display-buffer--maybe-at-bottom' and 'display-buffer-in-direction'),
>> if this will help to get rid of monstrous macro 'with-displayed-buffer-window'.
>
> Then go for it.

Here is the first step, this patch seems to keep the original behavior,
but I need your help to finish it.  Could you confirm that calls of
window-preserve-size at the end of with-displayed-buffer-window are
not needed anymore after this patch is applied, because there are the
same calls of window-preserve-size at the end of window--display-buffer
that are called later after buffer contents is filled
by after-display-function in the middle of window--display-buffer: