I think they turned to LFS for the second most popular reason: They looked around and didn't find an existing distro that met their needs.
Perfectly valid reason. I'm definitely surprised, but as long as dev didn't cause an exorbitant charge to the library, great.
I'd definitely be interested in hearing a summary of their experience and whether they'd approach the problem set the same way again, having done PXE setups myself for 700+ servers on established distro's (stripping Apache to mod_perl, fastCGI, etc.).