Yes, executable size is still a modern day problem. Imagine you're shipping an OS; do you want the hundreds of thousands of executables in your system to all be a few percentage larger when you're trying to ship to a customer who may only have 16 or 32 GB of storage space?
Of course, removing libc won't be your first (or second or third or ...) step for removing bloat from a mature codebase.
If you'r trying to reduce bloat in this OS would be dynamically linking anyway wouldn't you? I've installed those 300MB printer drivers so I'm all for reducing bloat. This just seems to be on the extreme end of things.
Of course, removing libc won't be your first (or second or third or ...) step for removing bloat from a mature codebase.