Is that still a thing? How much can you gain from customizing your ISOs using that tool? A few hundred megabytes?

It’s not about disk size. It’s about being in control what processes and services are running and spying on you.

NTLite can theoretically be compromised just like an externally sourced .iso.

NTLite comes from a trusted company, in the business of the administration of Windows installations. Still much more trustworthy than some random website allowing ISO downloads.