As to which is better, inside or outside patch, I think it is a matter of taste and sewing skill.
If you put the patch on the inside, less patch shows, but you still need, ideally to sew down the edges of the hole so that it does not continue to enlarge and become a bigger problem as well as bigger eyesore.
If you put the patch on the outside, it might actually be more obvious if it is a small patch. If you make a large patches that covers the entire knee area, from side seam to side seam, it can actually be less obvious. It might just look like pants with double, reinforced knees, especially if you go ahead and put a matching patch on the other knee.
There may be a comfort factor, too, I would find smaller patches more annoying than big ones whose edges fell on the sides where the seams of the jeans are already. But you might find small patches less annoying. For me it is kind of like getting used to a bothersome tag in the neck of a shirt.
Back in my early days it was fashionable to have patched jeans. People often used embroidered patches or appliqués to "personalize" their jeans. You can buy decorative patches at fabric shops. An awful lot of them will be cutesy little kid stuff or floral. Some might be preppy looking, like a patch you might see on a blazer. Some might be interesting in an ersatz ethnic way. I imagine you could buy another pair of jeans at Goodwill for the price of a cool embroidered appliqué at the fabric store.
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