ETFs are a relatively recent phenomenon, the criticism I remember from 2008 era is having paycheck + employee stock purchase plan + 401k concentrated in a single stock - employer's.
ETFs are mostly irrelevant from a 401(k) perspective because no one is trading on a daily basis. Some 401(k) plans do now offer ETFs among the investment options but for the most part they have always focused on regular mutual funds. Average expense ratios have come down a bit since 2008.
Do 401k plans allow people to buy single stocks? I never saw it in my experience. I cannot believe that would be considered "prudent" by financial regulators. However, when you leave a company you can "roll-over" your 401k into an IRA, then you can go wild and buy anything that you want (IBRK allows it).
