Late to the party, but...
The environment I work in is highly constrained, supporting some vendor products and providing "value-added" services like reporting. Due to policy and contract limitations, I am not usually allowed the luxury of separate table/data space and/or the ability to create permanent code [it gets a little better, depending upon the application].
IOW, I *can't* usually develop a stored procedure or UDFs or temp tables, etc. I pretty much have to do everything through MY application interface (Crystal Reports - add/link tables, set where clauses from w/in CR, etc.). One SMALL saving grace is that Crystal allows me to use COMMANDS (as well as SQL Expressions). Some things that aren't efficient through the regular add/link tables capability can be done by defining a SQL Command. I use CTEs through that and have gotten very good results "remotely". CTEs also help w/ report maintenance, not requiring that code be developed, handed to a DBA to compile, encrypt, transfer, install, and then require multiple-level testing. I can do CTEs through the local interface.
The down side of using CTEs w/ CR is, each report is separate. Each CTE must be maintained for each report. Where I can do SPs and UDFs, I can develop something that can be used by multiple reports, requiring only linking to the SP and passing parameters as if you were working on a regular table. CR is not really good at handling parameters into SQL Commands, so that aspect of the CR/CTE aspect can be lacking. In those cases, I usually try to define the CTE to return enough data (but not ALL data), and then use the record selection capabilities in CR to slice and dice that.
So... my vote is for CTEs (until I get my data space).