Your argument doesn't make any sense. You are saying microkernels are more modular in feature selection than monolithic kernels. That is not an inherent property if microkernels, nor is it true in practice. Nothing says a monolithic kernel can't have much more fine grained build time feature control than a microkernel where only entire services can be disabled (by not running them). Any reasonable monolithic kernel targeting embedded systems, including Linux but also anything smaller, will have a ton of build time options to slim down the system as needed.

A microkernel with feature control at the process/service level would actually have much worse feature control than Linux, because Linux build time configuration options are often quite a bit more finer grained than that. For example, you can build Linux for uniprocessor systems, which makes global build-time changes that disable certain kinds of locks, which makes it smaller globally. A microkernel could or could not have the same build-time feature; it is not guaranteed to.

As others have pointed out, microkernels have performance overhead and that reason alone makes them unsuitable for an N64. On a game console you need all the performance you can get.