Here's a simple test:
(let ((func (lambda (i)
(when (> i 0)
(print i)
(funcall func (1- i))))))
(funcall func 3))
It says (void-variable func), but why? When (funcall func 3) is called then func already has a value. Why doesn't the inside of the lambda see the dynamically bound variable?
Why doesn't the inside of the lambda see the dynamically bound variable?
Because it isn't actually dynamically bound.
Check the value of lexical-binding in the buffer where this form is located. While it is t evaluating this form raises this error. Once you have set it to nil it will work.
It would be better to stick to lexical bindings instead of doing that by letting the the lambda capture the lexically bound func like so:
(let (func)
(setq func (lambda (i)
(when (> i 0)
(print i)
(funcall func (1- i))))))
(funcall func 3))
letrec form should allow for this case directly.
letrec is a macro and expands to the code in the answer.