I do wonder why we would want a custom kernel though. On a physical machine you usually build custom kernels to enable certain hardware support, either directly or though kernel modules.

Not so much anymore (I believe they updated it) but originally they didn't allow kernel modules.... I believe they are adding module support now/soon.

This mattered for me because I wanted to remap esc/caps and to do so would have required a module. I tried everything I could with xev/xmodmap (and I think even keyd, which was the thing that required the module). xmodmap won't work due to how windows interfaces with WSL input IIRC. So without module support I wouldn't be able to use keyd (again, IIRC, it's been a while).

I just know that without module support I was unable to remap keys in the console (perhaps in GUI mode it could have worked, but I'm not using GUI).

I ended up using PowerToys to remap globally/inside windows and it's fine, but it wasn't my preferred method. I can't recall if systemd mattered or not, but in my case I didn't want to use systemd. Perhaps it wouldn't have been an issue, but yeah.

Recompiling with module support was the only way I would have been able to do that at that time.