As far as the rules as they are currently written go, (unless there has been a change that I am not aware of), the rules state that an Individual within 4" of a Warband is considered part of that Warband for targeting purposes.
It makes no distinction as to whether you can see any other member of the Warband or not.
So, as this rule states, if an archer unit wishes to Hail of Arrows an enemy Warband, and the only model they can see is an Individual within 4" of said Warband, then by the 4" rule, this shot is legal.
Is it a loophole? Perhaps. But a legal one as far as I'm concerned.
Now the question then becomes, "What is the intent of the rule of such a situation?"
Do I necessarily agree with this situation, no, I don't. As you have said, it wouldn't be a "realistic" situation, in that the archers wouldn't HOA an Individual model, that just so happens to be next to a Warband.
But one could make the same argument for it, in that, in a "realistic" situation, you could see the individual communicating with, or giving orders to, or whatever you may call it, to the Warband he is next to, and the logical choice would be to Hail of Arrows.
You can make an argument for it either way, really, it all depends on how you choose to look at it.
I look at it, as I do with everything, from a purely rules standpoint. And, unless this has changed in an FAQ or another thread, then, as the rules stand, this shot is legal.