My favourite projects typically have documentation in comments.

One example is SpiderMonkey, which uses these beautiful, long expository comments explaining not only what, but why design choices have been made. https://searchfox.org/firefox-main/source/js/public/RootingA...

If the goal is "locality", you can't get much closer than as a comment.

As far as markdown becoming "source code for agents" under the agentic paradigm, per-directory `AGENTS.md` seems more consistent, at least visually. If agent managed markdown is going to be high-churn, I'd rather it be confined to a single file. Constraints, especially for agents, are good.