[The Fifth Horseman]

Does this fall under the same legal guidelines as a zip archive would? Does Abandonia not host ISOs for any other reason than their size? Would hosting small ISOs like we do zip archives be feasible?

Yes, No and Yes again, in that precise order.

Would they be too technologically complex for the average user to comprehend?

There's no definite answer for that question. Most of those who have read the beginner's guide should have no trouble learning how to use IMGMOUNT, though.