Argyle King
Legend
I think you are both partially correct. Just to facilitate that discussion:
CaGI requires LoS and LoE, it is a burst 3, so LoE is required to the enemy, and it specifically targets only enemies you can see, so LoS (and non-invisible etc) is also required. You can argue some fine points here with Tremorsense and such, but basically you have to be able to 'see' the enemy, and if you can see it, then presumably it can see you too, barring some corner-cases.
In 4e spell effects, AoEs etc are not 'terrain' and thus cannot technically be hindering. You can force-move people through walls of fire without saves. This could indeed be an issue for some people, but again the DM is free to add requirements and exceptions for specific situations as he sees fit. You can argue that this is in fact what the 4e developers expected would happen (though you could as easily argue otherwise too). Some spell effects WILL of course block LoS and thus CaGI, though most of those are not also damaging zones.
Upon further reflection, I wouldn't say it necessarily bothered me. However, I would say it added some amount of comedy to how I envisioned the 4E world.
In a similar comedic vein, I remember using Mirror Sphere and causing an enemy with a swallow whole attack to eat itself.