Yes, probably doing this incrementally (or at least as separately from "user land" as possible) would have been much better.
Though, this gives full program optimization via jlink, and probably modularizing rt.jar would have needed serious platform/syntax changes anyway.
What would you prefer instead?
An example is that the Module definition file (Module-info.java) is in Java source code. Despite the compile time benefits (performance, security etc) this brings, it really locks down how user level module systems need to interact with this. I personally would have gone for a straight XML/JSON/Manifest.MF/YAML/Whatever format which wasn't tied to the Java compiler so tightly.