It is true that each manifold can be embedded into some Euclidean space $\mathbb R^N$. In other words, each manifold is dffeomorphic to a a submanifold of a Euclidean space, and therefore one could argue that it is sufficient to develop a theory for such submanifolds. In fact, some concepts (for example, the tangent space) even allow a more intuitive access for submanifolds than for "abstract" manifolds.
However, the embedding theorem is an existence theorem which does not provide a canonical embedding. There are many such embeddings, and each depends on certain choices. A priori it is not even clear what the minimal dimension $N$ of an ambient $\mathbb R^N$ is.
Many well-known manifolds are not given as submanifold, but by other constructions. Here are some examples:
Projective spaces $\mathbb RP^n$ and $\mathbb CP^n$
More generally quotients of manifolds by group actions.
Grassmann manifolds and Stiefel manifolds.
Quotients like $[0,1]/(0 \sim 1)$.
Try to find explicit embeddings of these objects into a Euclidean space - you will see it is not easy.
Thus I completely agree to the statement that
it is an undue restriction to require smooth manifolds to be subsets of some ambient Euclidean space.