Yes the output of the tool does modify and then output meshes from the mods the tool runs on. But it also produces an esp that has many of those mods as enabled masters, making those outputs partially useless without the original mods.
In this respect it is very similar to dyndolod , in that dyndolod outputs modified versions of textures etc, and produces an esp that has required mods as masters.
Yes the parallaxgen outputted meshes are more "useable" in isolation, in their modified form, than dyndolod outputs, but that is a matter of feasible work required to make them useable, and not a clear difference in the technical end result, both package up modified other mods' assets.
Same with Bodyslide output but that is an even clearer case, as that can output *completely* useable meshes .
Currently bodyslide output and dyndolod outputs are allowed to be uploaded to nexusmods for the purpose of a collection or modlist, seems parallaxgen output might be pushing the envelope a *bit* in comparison to dyndolod, but not much.
In terms of delta-patching, that is a possibility, though the resulting size of that could vary hugely.
