Editing grouped/clipped/masked objects

Can you provide a more visual example of what you have in mind for this?

Having thought about it, I think the main problem is the lack of feedback from the Layers palette. A quick search reveals a number of requests for a better Layers palette listing not just Layers and Sublayers, but groups and paths in a tree-like view, more like what illustrator, among others, has; for instance bug#181364. One (bug#181578) suggested adding this to the XML tree, which would not solve this issue, as the XML tree is too technical with a lot of other unrelated information, non-intuitive and not meant as a Palette that's always visible, like the Layers palette. I don't think mention has been made of clipping paths and masks in relkation to the Layers Palette, so worth mentioning here. Another example I gave above was a breadcrumb-like menu somewhere prominent above the canvas, a bit like the Folder view in Windows Vista: Layer->Sublayer->Group->Subgroup->Clipping Path with each segment clickable. But I'm not sure where that would go or work with an Illustration program.
For Inkscape, the best solution might simply be to fix the Layers palette so it can be expanded via a flippy triangle on the side, like in the XML editor, so it can, as mentioned, show not just sublayers but groups, and like when you open the XML editor when an object is selected, the layer can be expanded and the particular group or path is shown in the Layers palette (just as the group is shown in the bottom pulldown menu), so the user can visually see they are inside that group or sublayer, and they can easily go back by clicking/doubleclicking the main group/layer, or switch to another group. The XML edirtor is clearly unsuited for this kind of thing, and was never meant to be.
In Illustrator, there is a special circular target next to each layer, sublayer, or group specifically to select that object or everything on that layer/sublayer. A draggable square next to that indicates what layers currently has selected objects on them (for instance, selecting a layer selects everything on a sublayer/subgroups, or you may manually have selected objects on multiple layers). This is also convenient to quickly select a whole group which may be buried under other objects and to change its colour or something else, or drag it to another layer/sublayer. That would fix this usability issue as well as the general issue of Layers management.

Additionally, if the bottom menu was under the contextual toolbar, the drop-down menu would be more visible, though that might be subject to preference. I'm not a usability expert, but I think the information is by nature more eyecatching there than down by the bottom edge of the screen.