Using a list to explain symbols used in an equation?

In some journals there are page limits, and so your first example becomes more relevant. But I agree your second example is more readable.

Unless you get contrary feedback from a reviewer (or advisor for a thesis), I think the format you use is up to you. Your suggestion adds readability and understandability and only loses compactness. To me it seems a positive tradeoff. But an editor might have specific needs.

But write as you think best, and yield to reviewers as necessary.

Good question! This is perhaps a matter of taste, and I don't know if there's any science about what's supposed to be more readable, but I prefer the former method. I feel it flows better when I read. The same goes with other kinds of lists, such as lists of assumptions.

A few times I have tried to make a bullet point list, only to find that I can control the flow better when I remove the bullets. I can customize the punctuation, and even interject more details on some points without making the list look typographically unbalanced. Here's an example from one of my own publications:

The expression is valid for a plasma that is 1) collisionless, 2) non-drifting Maxwellian, and 3) nonmagnetized. These assumptions are justified in [1] and will not be further investigated here. It is further required that 4) the ion collected current is much smaller than the electron collected current. This is true for typical ionospheric conditions with ions drifting at approximately 7500 m/s, 5) that the object is not affected by other, nearby objects, and 6) eV/kT > 0 or, for cylindrical objects, eV/kT > 2. As for the probe geometry, it is assumed that 7) the probe is very thin (r << λ_D), and for cylindrical probe 8) very long (l >> λ_D). The m-NLPs on CubeSats typically have a radius of 0.255 mm [2], such that r/λ_D < 0.2 for the Debye lengths considered. According to numerical simulations by Laframboise [7], finite-radius effects are not significant even for r/λ_D = 1, so this assumption is valid. The assumptions eV/kT > 2 and l >> λ_D will be discussed further in what follows. The vicinity of other objects is only briefly considered.

Often I avoid lists all together for the sake of flow, but in this case I wanted the assumptions to be clearly and explicitly listed. Having a bullet point list and discussing the items afterwards would only have disrupted my flow. Others may prefer otherwise, of course.

I suspect some would think lesser of a bullet point list, perhaps in particular since it is unusual, and that this may detract from your referee's impression of the paper. For my own part, I would perhaps suggest to change it, but I would not let it decide whether the paper gets accepted or not.