The light clock model assumes that distance is an invariant quantity. No it doesn't. The distance the longer diagonal light path takes is measured in the stationary outsider's frame of reference, which of course is fixed with respect to him. The shorter straight up and down path is measured by the observer moving along with the light clock. It all stems from the assumption that the speed of light is the same for all observers, regardless of their state of motion.
http://galileo.phys.virginia.edu/classes/252/srelwhat.html
It still treats distance as being homogeneous and accounts for the time dilation based upon movement through homogeneous space.
>>regardless of their state of motion.
What happens when the observer is not moving - but the light passes near a massive object en route to the observer?
Does the light move through more space or less?