I think that is wrong. Using modified flash rather than direct flash to fill shadows produces much more natural looking results. A portrait rather than just a flash picture.
Your right, and your wrong when you imply that a Tupperware diffuser like the Stofen Omnibounce or Gary Fong Light Sphere will modify the flash enough to make it worth using outdoors. As has already been said several times, it doesn't provide any direct softening of the light the way a large diffuser does, all it does is send light off in all directions to bounce off of near by walls and ceiling. If those near by walls and ceiling aren't there (outdoors or in a large room) then all the Tupperware diffusers do is lower the amount of light reaching the subject by about 2 stops.
Direct flash flattens the features and contours of the face. It's not just the quantity of the light which counts. It's the quality of the light. I urge everyone to compare and see for themselves.
Yes! You are absolutely correct. Direct flash is flat without shadows and it is not flattering.
To get modeling of the face with shadows to turn a 2D image into something that the mind interprets as 3D you need those shadows. The softness of the main light, as well as the amount of fill light, determines the ratio of shadow to highlight. Flattering light has an in between ratio, not too high, not too low.
If you want good quality soft light for good portraiture you have to get the main light off of the camera and you have to use a diffuser that is close to the size of the subject or larger, and at a distance of 1 to 2 times the measured diameter of an umbrella or measured diagonal of a softbox.
If you think your shadow/highlight ratio is still too high (shadows too dark vs highlights) then you can add a bit of fill light with your on-camera flash, but it should never be used as the main light.
Note: The stated size of an umbrella is measured over the top, not across the open umbrella so you have to measure the diameter across the opened umbrella.