in the end the same amount of data was written to the HDD.
So that is not a valid argument.

Can we use an ISO instead of file system? Maybe.

Why would we?
All of the other tools for NT5 require a file system and do not interact with ISO images.
That would mean most users would not want or need it since every other step in preparing an image requires it to be extracted and on a read / write device IE a HDD.

it's not a bad idea, it just does not go with the flow of broadly accepted existing tools and procedures.
and at this point i don't see any of the top players rewriting code for a ten year old OS that expires next year.

I could be wrong.

Jeff