(I'm no C expert, I'm posting my take on this mainly because I'm interested in learning from counterarguments):

Greatgrandparent's error was lack of such inner declaration. -Wshadow wouldn't help with that.

Also, I imagine enforcing old-style declaration restrictions helps you to avoid introducing those errors in first place, but it's just as hard to debug them once they're in.

My choice would be to get in the habit of declaring a variable in the narrowest scope that makes sense. I can't see much of a problem with this (esp. in the context of C!) barring old habit. I don't think Scheme programmers, for example, have this stuff any easier and I don't think scoping is perceived as a problem there.