Figured out that even more tests require AST traversal. Now we insert ... instead of attempting to find them.

function.lua

@@ -58,12 +58,13 @@ end
 -- FUNCTION_DEFINITION_MATCH is a lua pattern, for finding a function definition.
 -- NOTE: It will match malformed unicode sequences, and thus assumes that the
 -- string checked against have been checked by the lua interpreter.
-local FUNCTION_DEFINITION_MATCH =
+local FUNCTION_KEYWORD_MATCH =  '%f[%a_]function%f[^%a_]'
-    '.*%f[%a_]function%f[^%a_]%s*'       .. -- Look for the function keyword
+local FUNCTION_DEFINITION_MATCH = '.-'   .. -- Look for stuff before the function
+    FUNCTION_KEYWORD_MATCH .. '%s*'      .. -- Look for the function keyword
 	'([a-zA-Z0-9\128-\255_.:]*)%s*'      .. -- Look for the function name, if any
 	'(%([a-zA-Z0-9\128-\255_,. \t]*%))'  .. -- Look for the function parameter list.
 	'[ \t]*(.+)[ \t]*'                   .. -- Look for the function body
-	'end'                                     -- Look for the end keyword
+	'end'                                   -- Look for the end keyword
 
 local NR_CHARS_IN_LONG_FUNCTION_BODY = 30
 
@@ -250,7 +251,7 @@ return function (value, depth, l, format_value)
     if info.defined_how == 'string' then
         -- Function was defined as a string
 		local _, body  =  get_function_paramlist_and_body(info)
-		if #body <= NR_CHARS_IN_LONG_FUNCTION_BODY and not body:find '\n' then
+		if #body <= NR_CHARS_IN_LONG_FUNCTION_BODY and not body:find '\n' and not body:find(FUNCTION_KEYWORD_MATCH) then
 			function_body  =  body
 		end
     end

test/test_function.lua

@@ -270,15 +270,7 @@ format_test {
 }
 
 format_test {
-    name  = 'Embed nested function, when they end on different lines',
+    name = 'Embedding nested function, when on same line is too hard 1',
-    single = true,
-    adv_getlocal = true,
-    input  = loadstring('return function () return function () end\nend')()(),
-    expect = 'function () end',
-}
-
-format_test {
-    name = 'If embedding the correct function becomes too hard, ignore 1',
     single = true,
     adv_getlocal = true,
     input  = loadstring('return function () return function () end end')(),
@@ -286,13 +278,21 @@ format_test {
 }
 
 format_test {
-    name = 'If embedding the correct function becomes too hard, ignore 2',
+    name = 'Embedding nested function, when on same line is too hard 2',
     single = true,
     adv_getlocal = true,
     input  = loadstring('return function () return function () end end')()(),
     expect = 'function () ... end',
 }
 
+format_test {
+    name  = 'Embedding nested function, when they end on different lines is too hard',
+    single = true,
+    adv_getlocal = true,
+    input  = loadstring('return function () return function () end\nend')()(),
+    expect = 'function () ... end',
+}
+
 format_test {
     name   = 'Embed functions which contains the word "function"',
     single = true,