I worked on an application implemented in SmallTalk for about two and a half years, and having the IDE be in the application was honestly a huge force multiplier, at least for the kind of complicated desktop application we were making. Basically, it made development extremely smooth because you always had the application at your fingertips and while developing no matter what kind of error happened it would trap into the debugger so you could see what was going on. No more remembering to set breakpoints or running under a debugger or anything; just write code, test and get dropped straight in the debugger if something goes awry. In some cases we could even fix the bug, and retry the failing operation in-flight. To stretch the Factorio metaphor beyond the breaking point, I would even say that the image-based nature helped there to be less mess, because you no longer have to care about the organization of your code in the source files: you edit methods and classes, but the on-disk organization of the bits and pieces is no longer a concern.
Where the image-based system does cause trouble is when you need to interact with stuff outside of SmallTalk. It basically doesn't play very well with others (in particular stateful stuff like database connections which can't straightforwardly be persisted when the image is saved and closed). But overall, I found developing in SmallTalk to be extremely productive, even in the antiquated implementation we were working with.
Where the image-based system does cause trouble is when you need to interact with stuff outside of SmallTalk. It basically doesn't play very well with others (in particular stateful stuff like database connections which can't straightforwardly be persisted when the image is saved and closed). But overall, I found developing in SmallTalk to be extremely productive, even in the antiquated implementation we were working with.