1. This is a brilliant hack. Kudos.
2. It would be great to see the best codecs included in the comparison - AVIF and JPEG XL. Without those it's rather incomplete. No surprise that JPEG and WEBP totally fall apart at that bitrate.
3. A significant limitation of the approach seems to be that it targets extremely low bitrates where other codecs fall apart, but at these bitrates it incurs problems of its own (artifacts take the form of meaningful changes to the source image instead of blur or blocking, very high computational complexity for the decoder).
When only moderate compression is needed, codecs like JPEG XL already achieve very good results. This proof of concept focuses on the extreme case, but I wonder what would happen if you targeted much higher bitrates, say 5x higher than used here. I suspect (but have no evidence) that JPEG XL would improve in fidelity faster as you gave it more bits than this SD-based technique. Transparent compression, where the eye can't tell a visual difference between source and transcode (at least without zooming in) is the optimal case for JPEG XL. I wonder what sort of bitrate you'd need to provide that kind of guarantee with this technique.