Does "Erase all content and settings" help with potential Data partition file system issues?

Erasing the key in this manner renders all files cryptographically inaccessible.

The data is still there - but no-one is ever going to be able to read it.

Let me take a distant example…

You lose your house keys. All the furniture is still there, you just cannot get to it.
The difference in this case is the ease with which you could actually break a window to get in, or you could call a locksmith.

The locksmith required to decrypt your iOS data is not available on the other end of a phone call. It would require the involvement of probably something as rich & powerful as a government agency, determined to prove you are a terrorist.

Because of this encryption & the way that solid state storage works to spread the load, if you then restore or set up a brand new install, your old data is more than just un-decryptable, it's also been randomly overwritten too. Solid State storage doesn't write sequentially like an old hard drive. The concept of 'bad blocks' is not the same.

Of course, you would never store the only copy of any data in a single location, especially not a fragile mobile device. Far more likely than file corruption is serious physical damage to the entire unit.