The basic problem is that we have two equivalent data structures that have different “shapes”. One of the shapes is a flat list and the other has some extra levels of structure. What I don’t know is if you have a bunch of different shapes rather than just two. Or maybe you have a bunch of scenarios that all have two shapes, but the two shapes are different across the pairs. So, situation #1 would be having, say 16 arguments that can show up in three different shapes: a flat list, a 4x4 matrix, and a 2x8 matrix. Situation #2 would be that for some particular function, we need to transform between a flat list and a 4x4 matrix, but for some other function we need to transform between a flat list and a 2x8 matrix. Anyway, what I would suggest is that you build helper functions to do the transformations and have your main functions leverage these helpers.
We know we can go from the more structured shape to a flat list with Flatten, so we only need to implement an Unflatten (or maybe several different Unflatten functions, in which case you should name them distinctly). It might also just help readability to be even more explicit about naming the argument patterns.
StructuredPattern = {{_, _}, {{_, _}}};
ListPattern = Flatten[StructuredPattern];
UnflattenSequence[a_, b_, c_, d_] := {{a, b}, {{c, d}}};
UnflattenList[list : ListPattern] := UnflattenSequence @@ list;
FunctionSequence[args___] :=
<|"what I pass to the list processing function" -> List[args],
"what I pass to the structure processing function" -> UnflattenSequence[args]|>;
FunctionList[args : ListPattern] :=
<|"what I pass to the sequence processing function" -> Sequence @@ args,
"what I pass to the structure processing function" -> UnflattenList[args]|>;
FunctionStructure[args : StructuredPattern] :=
<|"what I pass to the sequence processing function" -> Sequence @@ Flatten[args],
"what I pass to the list processing function" -> Flatten[args]|>;
FunctionSequence[w, x, y, z]
(*
<|"what I pass to the list processing function" -> {w, x, y, z},
"what I pass to the structure processing function" -> {{w, x}, {{y, z}}}|>
*)
FunctionList[{w, x, y, z}]
(*
<|"what I pass to the sequence processing function" -> Sequence[w, x, y, z],
"what I pass to the structure processing function" -> {{w, x}, {{y, z}}}|>
*)
FunctionStructure[{{w, x}, {{y, z}}}]
(*
<|"what I pass to the sequence processing function" -> Sequence[w, x, y, z],
"what I pass to the list processing function" -> {w, x, y, z}|>
*)