Idea for a novel interface:

Start with our planned document editing mechanism for Xanadu, wherein any text typed gets appended to a (visible) permascroll — however, autocomplete/search based on the corpus of all resident text, showing matches with some context below.

Click moves cursor, drag on unselected text selects it, drag from selected text to selected text creates a link (and brings up link options with some reasonable defaults), drag from selected text to unselected text inserts the transclusion. All xanadu editing logic so far.