1 3 5 is a perfectly legitimate chord progression. In C, it would be C Em G. When Russell talks about "outside" chords, he's talking about playing chords that don't fall into key.
In other words, when you are playing in a key, "inside" chords would only be made up of the 7 notes that are in that key. For example, in C major, all chords would be constructed of some selection of the notes
C D E F G A B
Using the modal discussion above, you can construct triads and 7s from that using only those notes.
However, using Russell's example, going from C (C E G) to E major (E G# B) you can see that G# doesn't exist in the key of C. To be "inside," or "in key" when playing an E based chord, it would need to be minor (E G B).
More to Russell's point, there is absolutely *nothing* wrong with that. It's just good to know what you're doing, and why.
Someday we'll win this thing...www.aclosesecond.com