I myself don't see a ton of avoidance to dirt holes. There's some educated ones that darn sure avoid them but we have enough coyotes you don't need to catch the smart ones to put up good numbers. But my general population will be spooky of new objects that you bring to the set location like a log or bones. I put a stick about 3/4" in diameter vertical in front of a camera with about 12" above ground. Two different locations. I put a proven lure coyotes loved to roll on to see if a rub set would be effective for coyotes. Probably got about 6 or 8 visits to those test set and only one coyote got within 3 foot of that stick. He came up to it and smelled but I suspect it was his 3rd visit before he got his courage up. I've run more blind sets last couple years but they are slower to connect for me than a good dirt hole but probably catch more of the shy coyotes. They also catch a high percentage of non targets here. I keep telling myself I need to learn to master flat sets and I've caught coyotes in them but I have a mental bias towards them because I feel like I can't control foot placement as well at them and I hate to miss one by three inches. Also we have enough coyotes the dirt hole is just pretty effective. I'm going to force myself to use more flat sets just to master another tool and skill set. Same for snares.
I’m a dirt hole guy too. From what I’ve seen a lot of sets are made to close to tall backing, and by tall backing I mean anything over 6”. It takes a really hungry coyote or a dumb one to commit.
I see this said a lot, and used to put more faith in it. But I see often where they pee on big trees, just like a dog. And when you find those they are a dynamite set, even though the "backing" is 80-100 feet tall. I find myself using more large trees for the backing/lure holder on flat sets and pee posts I make myself and having good luck with it. The coyotes don't seem to avoid them at all, of course that tree has been there the coyotes whole life, so he is perfectly accustomed to it. Now that being said, you want a tree without low branches, if you can walk under it without ducking, or at most just ducking your head, not having to bend your back any; that is the type of tree you want. They are leery of having a bunch of low hanging branches hemming them in. Now I've not tried making dirtholes up tight against big trees much, because a)I'm not much of a dirthole guy and b)roots really get in the way of digging your hole, they can often get in the way of a trap bed, much less a dirthole.