Russell McCutcheon has edited a book collecting various opinions on the insider/outsider debate for the study of religion. The book collects essays from an impressive array of philosophers, theologians, anthropologists, and historians of religion, including, Alasdair MacIntyre, Clifford Geertz, Rudolf Otto, Joachim Wach, Mircea Eliade, Robert Segal, Ninian Smart, Wendy Doniger O'Flaherty, and Jonathan Z. Smith, among many others. The book is divided into several parts, depending upon the arguments made (e.g., those viewing religion as sui generis; those reducing religion to some other phenomenon; those advocating methodological agnosticism, etc.).
Well then, who is in a better position to analyze any given religion, an insider or an outsider? An insider is a practitioner of the religion in question, a devotee. An outsider does not practice the religion under study. The insider might be overwhelmingly partial and thus avoid difficult questions posed to his religion. He might also overlook or explain-away embarrassing beliefs and practices or awkward historical moments. On the other hand, the outsider might have his own biases and may lack the empathy required to understand "the other." Think of religions different than your own. Who might better provide an analysis of these religions, the insider or the outsider? Does your opinion change when it's your religion under discussion?
The insider definitely has experiential knowledge of his religion, and he may also be thoroughly versed in the history and ideation of the tradition. We cannot minimize the importance of the insider's view. But the study of any topic is benefited by detached scrutiny. An outsider, Alexis de Tocqueville, a Frenchman, produced one of the very best analyses of American politics and culture. His 19th-century multi-volume work, Democracy in America, is still read in universities worldwide as a perspicacious outsider's perspective.
There have been enormous advances in the understanding of religion in the modern era from outside observers in anthropology, sociology, psychology, history, political science, philosophy, and religious studies. At times, scholars in these academic fields possess more knowledge about the religion under study than some insiders (studying for years; mastering multiple foreign languages, literatures, and ancient histories; and even living among the people under study). But, yes, as outsiders they would lack the experiential knowledge of the religion.
Even so, it has been the position of many scholars in these disciplines that, generally, people who are under observation cannot absolutely dictate the way in which they want to be understood.
Consider: There is a white-supremacist religiosity in the USA. Who would offer the best analysis of this species of religion? Certainly not its practitioners. And although we would welcome an insider's view of Haitian Voodoo, we would probably not ascribe magical efficacy to effigies; we would likely explain this particular phenomenon by other, outsider theories.
While there is certainly a role for the phenomenology of religion in the study of religion (fair, accurate, and sympathetic description of a religion--offered by the insider or the outsider), the critical study of religion often goes beyond this to create explanatory theories for religious phenomena, and these theories are often, but not always, offered by outsiders. Scholars who are insiders regularly and self-consciously attempt to "bracket" their emotional commitments to the religion under study so that the study is not hobbled by bias, and these insider-scholars often do produce penetrating analyses of their religions.
No insider should fear the outsider's analysis. The outsider may be a godsend, opening paths of understanding heretofore unseen, unknown, and untravelled. This is a necessary book for any scholar of religion or any theologian.