A β-reduction is basically the same as a function call, we know how to implement those, and they take constant time. Your example could be directly interpreted as a program in e.g. Lisp or ML, and there the function call is definitely not implemented by stepping through the entire program symbol by symbol.
I think the issue in the stackoverflow post above is that the lambda calculus is nondeterministic, so if you try to define the cost as the smallest number of β-reductions to reduce a term to a value, then you're in trouble because it's in general very hard to figure out what the optimal way of reducing a program would be. But that also shows that it's a completely unrealistic model. Surely what we should do is pick an evaluation order, e.g. call-by-value, and then count the number of reductions there. This corresponds to what actually happens when you run your program on a real computer.
In fact, CBV evaluation is really well-behaved, and you can given an extremely intuitive cost semantics to such a lambda calculus: see section 7.4 in [1], and also see [2] to show that this semantics is sound in the sense that you can compile it down to an abstract machine respecting the cost. (Incidentally, this is something that Bob Harper has been talking about for a long time, see e.g. his blog post [3] for some polemics.)
If anything, I think what this argument shows is that Turing machines are bad for complexity-theoretic purposes. We do not want to "analyze our algorithms in terms of atomic operations that can be implemented in O(1) on a Turing machine", we want to count atomic operations that can be executed in O(1) time on the actual computers we run stuff on. So Turing machines are ok if you just want to distinguish polynomial from non-polynomial time, but for finer-grained distinctions you need a more accurate model, like a RAM, or... like the lambda calculus!
[1] https://www.cs.cmu.edu/~rwh/pfpl/2nded.pdf [2] http://www.cs.cmu.edu/~blelloch/papers/BG95.pdf [3] https://existentialtype.wordpress.com/2011/03/16/languages-a...