Looking again at that contain_vars_of_level restriction, I think the reason for it was just to avoid making a FROM subquery that has outer references, and the reason we needed to avoid that was merely that we didn't have LATERAL at the time. So I experimented with the attached. It seems to work, in that we don't get wrong answers from any of the small number of places that are affected. (I wonder though whether those test cases still test what they were intended to, particularly the postgres_fdw one. We might have to try to hack them some more to not get affected by this optimization.) Could do with more test cases, no doubt.
Hmm, it seems there were discussions about this change before, such as in [1].
One thing I'm not at all clear about is whether we need to restrict the optimization so that it doesn't occur if the subquery contains outer references falling outside available_rels. I think that that case is covered by is_simple_subquery() deciding later to not pull up the subquery based on LATERAL restrictions, but maybe that misses something.
I think we need to do this, otherwise we'd encounter the problem described in [2]. In short, the problem is that the constraints imposed by LATERAL references may make us fail to find any legal join order. As an example, consider
explain select * from A where exists (select * from B where A.i in (select C.i from C where C.j = B.j)); ERROR: failed to build any 3-way joins
