In the days of Dos, user interfaces were supplied by the running
program. This job is now part of the OS.
Much of the GUI are pictures stored on your hard-drive. Pictures take up
a bunch of space. Many of the routines are built into the API that had
to be built for every program in Dos days. Just the books and references
for the API and how to hook into them are huge. Mouse handling routines
are bigger than you would expect, remember that no mouse was used on the
Old Dos machines, and resolution stunk. When there was mouse functioning
it was program by program but would not work on all programs because the
handling was done with the programs routines not the OS as it is done
today. Dos was single tasking; one program would run at a time and
never more than one program. Loop routines are built into a
multi-tasking OS to alot time for everything running. Analogous to
interrupts, flags are set by programs to demand processor time. Not an
issue with Dos a single processing OS.

Do you remember how many years you found machines OS/2 ready before OS/2
was released? Multi-user, Multi-Processing OS's are a huge
accomplishment, that said they also run slower because the processor
time is sliced between running processes, and require more resources.
Disk, Memory, and processor, that make the system look like it is doing
more than one thing at a time is the major reason for more power and size.

In-line code makes a process run faster, but unlike the system calls
that are used for modular code, the in-line code is repeated many times.
This fact makes faster code take more space in memory as well as disk
space. (Don't forget GUI is both memory hog, and processor hog, not a
DOS issue).

Summary;

Optimized code=fast running code with a larger demand on disk space and
memory.
Modular code= slower running with less need for large hard drives and
lower memory requirements, but require faster processors.

It is all compromise, and in this day of low price hardware, it is easy
to understand the larger hardware requirements over the hardware
optimization of the past. In dedicated controllers optimization of
hardware is still an issue so we find more compact code even today.

With this information we can begin to see why Linux geeks still consider
compiling an OS from code rather than a simple install that most of us
prefer.