Currently javac is generating the diagnostic position for the mentioned lambdas in this way:

Test.java:17: error: incompatible types: bad return type in lambda expression
        foo((x) -> { return ""; System.out.println(""); });
              ^

The proposal is to show the position where the body starts:

Test.java:17: error: lambda body is neither value nor void compatible
        foo((x) -> { return ""; System.out.println(""); });
                      ^

reported at compiler-dev: http://mail.openjdk.java.net/pipermail/compiler-dev/2014-November/009146.html