When you define a semantics of function definition, as a language designer, you have choices: either to make the name of the function visible in the scope of its own body, or not. Both choices are perfectly legal, for example C-family languages being far from functional, still do have names of definitions visible in their scope (this also extends to all definitions in C, making this int x = x + 1 legal). OCaml language decides to give us extra flexibility of making the choice by ourselves. And that's really great. They decided to make it invisible by default, a fairly descent solution, since most of the functions that we write are non recursive.
What concerning the cite, it doesn't really correspond to the function definitions – the most common use of the rec keyword. It is mostly about "Why the scope of function definition doesn't extend to the body of the module". This is a completely different question.
After some research I've found a very similar question, that has an answer, that might satisfy you, a cite from it:
So, given that the type checker needs to know about which sets of
definitions are mutually recursive, what can it do? One possibility is
to simply do a dependency analysis on all the definitions in a scope,
and reorder them into the smallest possible groups. Haskell actually
does this, but in languages like F# (and OCaml and SML) which have
unrestricted side-effects, this is a bad idea because it might reorder
the side-effects too. So instead it asks the user to explicitly mark
which definitions are mutually recursive, and thus by extension where
generalization should occur.
Even without any reordering, with arbitrary non-pure expressions, that can occur in the function definition (a side effect of definition, not evaluation) it is impossible to build the dependency graph. Consider demarshaling and executing function from file.
To summarize, we have two usages of let rec construct, one is to create a self recursive function, like
let rec seq acc = function
| 0 -> acc
| n -> seq (acc+1) (n-1)
Another is to define mutually recursive functions:
let rec odd n =
if n = 0 then true
else if n = 1 then false else even (n - 1)
and even n =
if n = 0 then false
else if n = 1 then true else odd (n - 1)
At the first case, there is no technical reasons to stick to one or to another solution. This is just a matter of taste.
The second case is harder. When inferring type you need to split all function definitions into clusters consisting of mutually depending definitions, in order to narrow typing environment. In OCaml it is harder to make, since you need to take into account side-effects. (Or you can continue without splitting it into principal components, but this will lead to another issue – your type system will be more restrictive, i.e., will disallow more valid programs).
But, revisiting the original question and the quote from RWO, I'm still pretty sure that there is no technical reasons for adding the rec flag. Consider, SML that has the same problems, but still has rec enabled by default. There is a technical reason, for let ... and ... syntax for defining a set of mutual recursive functions. In SML this syntax doesn't require us to put the rec flag, in OCaml does, thus giving us more flexibility, like the ability to swap to values with let x = y and y = x expression.
