Refactor filesystem event handler into a separate section

[philip-peterson]

Refactors the generatecmd::Run function into two functions, to reduce complexity. In doing so, I noticed that a few instances of error handling operate by defining a new variable err and logging and/or returning it immediately, while another instance assigns the preexisting symbol err which represents the return value. Because this logic was very unclear, I renamed the top-level err to proxyError (since it is only used for the proxy) and removed the named-return value so that any assignment to err must be its own contained definition to make for better readability.

The diff shows that StartProxy was changed (actually moved), but that is just due to the addition of a new function (and removal of part of another) which confuses the Git diff algorithm.