There were stories of Sinclair game devs using CPCs in a similar way simply because they couldn't stand the Sinclair keyboards.
Especially since the release of Turbo Assembler in 1985, serious development on the C64 was quite comfortable.
Years later in the 90ies, Fairlight enhanced Turbo Assembler with REU support, which made development on the machine itself ridiculously comfortable. Basically the only thing missing I can recall was there was no concept of version management back then.
Of course, this came too late for professional development but it's basically what the demo scene ran on till cross assembling from PCs came in vogue.
I seem to recall an interview with Paul Urbanus in which he noted that the graphics for Parsec on the TI-99/4A were designed on the TI-99/4A, which to him proved the machine as a tool for serious creative work.
The HN comment:
It was far more productive to just write/run code on a dedicated Atari/C64 or whatever the target system was.
By that point, more powerful development machines and tools will have become much more affordable/available than in the early 80s.
IIRC he says they used UNIX workstations to develop Maniac Mansion/SCUMM for the C64. Complete with hot loading of levels, presumably they had a similar hardware interface to what's shown in TFA for manipulating C64 memory contents from the UNIX box.