Hidden? Yes.
Code legal accessible? Also yes.

1. If this splice is put in a junction box, I presume you mean that this new box will have an accessible cover plate rather than being hidden behind sheetrock?

2. If you wanted to have it all in one box, why not just use a big enough box to meet boxfill requirements?

It would probably depend on the inspector, but I had this exact situation a few years ago, and he gave it the go ahead.

If this splice is put in a junction box, I presume you mean that this new box will have an accessible cover plate rather than being hidden behind sheetrock?

The box will be hidden but accessible, just like the box associated with the recessed can.

If you wanted to have it all in one box, why not just use a big enough box to meet boxfill requirements?

Because the box is integral to the fixture.

I'm going to talk with the AHJ this week, but I have a feeling he is going to agree with the interpretation that it is hidden, but accessible, and thus, legal.

shadow-
In my experience -- where I live -- inspectors have been generally ok with a junction box that was behind sheetrock in the ceiling only if there was an attic above and the box was visible and could be accessed from that attic. I'm assuming you are arguing that someone pulling out the light fixture will see the other box, and that makes it accessible. I'll be interested to hear what the inspector says. Generally the problem with hidden junction boxes is that, while you might remember where they are, any subsequent owner (or an electrician looking to fix a problem) will have no idea that this box exists. Your inspector may be more open-minded than the ones in my area. Good luck and give an update, please.

Is this a knob & tube blob?

Talked with the AHJ this week... no problem with my plan.

He says his interpretation is that the box is as legal as the hidden box that is attached to the recessed can.

The box is in place and the can is installed.

There is NO WAY one could argue that a box next to a remodel can was not "accessible". To the letter of the code is certainly IS.
Inspectors CANNOT simply make up their own rules or enforce rules that do not exist.

Shadow, your guy made the right call.

IMO, it may meet the letter of the code, but not the spirit. I can't imagine a future electrician looking for a failing splice thinking to look there. Certainly I wouldn't. And I wouldn't install something like this.

But your inspector passed it, so ...

"IMO, it may meet the letter of the code, but not the spirit. I can't imagine a future electrician looking for a failing splice thinking to look there."

You mean like one buried under 24" of blown-in insulation in a remote corner of an attic? Same level of "accessible" IMO, only easier to get to. lol

Yeah, Pete, but you'd probably think to dig through that insulation. If the circuit you were troubleshooting wasn't related to the can, would you think of pulling out a can and looking into the access hole? I know I sure wouldn't. You'd probably have to use a mirror to see up there, too.

I can't imagine a future electrician looking for a failing splice thinking to look there.

I realize that I am not an electrician, but when I toned out the circuit, I found a tee at this location. My assumption was that the circuit went down the wall to a switch and outlet, back up to this location, and then across the room to the light and places beyond.

Little did I expect to find a flying splice there.

In the future, assuming my circuit diagram on the panel has been lost, a "real" electrician toning the circuit will see a tee right at the recessed can. I would expect that he or she would consider the fact that there might be a junction in the box that is required to be there by code for the recessed can, especially if they see only a single wire going to outlet (the switch has been removed).

While the circuit will not use the can's box, it will be enough to get someone to look there, where they will see the wiring and the other junction box.