Basically I'd like a KVM set up, but without the need for an external keyboard and trackpad.
Universal Control: https://support.apple.com/en-us/102459
Synergy: https://symless.com/synergy
The Mac keyboard and trackpad do not have external connectors. A hardware solution would require opening the MacBook and wiring ports and a switch from those devices. There is not a plug and play solution.
They're getting small: https://www.ikoolcore.com/products/jetkvm
I assume you have a little software on the controlling computer that sends keystrokes over the network, they are received by this device, and sent via usb to the controller computer, simulating a usb keyboard?
Do you have experience with it? How is the latency? Does it work with the macbook trackpad?
The latency is adequate but not on par with a physical keyboard, and latency will depend on network performance.
IP KVMs can and do work with the MacBook trackpad, but as above, performance is not what you would expect from a wired, real-time connection, and you should not expect multi-finger gestures to work unless explicitly advertised.