Why are podded engines preferred over engines fitted inside the fuselage or wing?
Most important factor affecting drag is frontal area. Almost all frontal area of the engine pod is the intake and it has to have the size it does to collect the air the engine needs. So there is not so much drag to be saved.

Beside that, embedding the engine in wing roots like De Havilland Comet did has many disadvantages, most of which also apply to the central engine of three-engined jets (B727, DC-10):


The wing root carries the weight of the aircraft, so weakening it by embedding the engine is design and construction complication.
Access for maintenance is difficult. Engines need a lot of maintenance and sometimes need to be replaced.
Uncontained failure is more dangerous (see UA232).
There is not much structure to damp vibration, so it is awfully noisy.
And last but not least, modern high-bypass turbofans are huge. They would not fit in the wing anyway.


And reasons for not attaching the engines directly to the fuselage or wing are already mentined in Why do we use pylons to mount the engines on jetliners?. Mainly, the inlet needs:


Free space around it from which it can draw air at slow speed.
Free space around it to which it can spill the excess air at high speed.


And the engines mounted forward of wing actually improve the distribution of cross-sectional area according to the Whitcomb area rule and they dampen flutter, so the wing can be slightly less stiff and thus slightly lighter.