I believe that (at least in physics) keeping track of the units is powerful. In mathematics one can avoid mistakes by assigning units to quantities (e.g. Riemannian geometry, differential equations), even though they are abstract and originally dimensionless. This is just a prejudgement, but it works for some people.
Anyway, what is the meaning of a quantity having units in mathematics? Hardly one one can give an answer withoug evoking physics. Thus, rather than using reductio ad absurdum to conclude that coordinates cannot have the dimension of length, I think that the units used to write the metric are "natural units" (in the sense of physics, e.g. $\hbar=1=c$) because of the following fact:
In physics, the canonical coordinates of $\mathbb{R}^m$ have units of length.
If you want to keep track of units the metric should be $h_{ij}=\kappa \delta_{ij}/y^2$, as one for instance writes metrics if one does not work in natural units:
$$ds^2=c^2 {d \tau}^{2} =
\left(1 - \frac{r_S}{r} \right) c^2 dt^2 - \left(1-\frac{r_S}{r}\right)^{-1} dr^2 - r^2 \left(d\theta^2 + \sin^2\theta \, d\varphi^2\right)$$
(the Schwarzschild metric). A second example why is not convenient to forget that
coordinates have units is when one writes an action functional like $\int_M L\,d(vol) $. Here $d(vol)$ has dimension (length$)^n$ so $L$ must have dimension $(length)^{-n}$. How would you rule out so many possible actions if not by dimensional analysis and requiring that (some of) the coordinates have units?
My point is that, even though you cannot assign length to all coordinates, once one can consistently impose that $ds^2$ has square length units: because of the way $g_{ij}(x)$ transforms, any change of coordinates will give you the right factors.
To addres the title question, flatness does not have to do with having dimensionless metrics. For instance, $(x^2+y^2)(dy^2+dx^2)$ is a metric which is not flat, and, if you assign length units to these coordinates, the metric won't be dimensionless.