Instead, I see yet another graphical distro with graphical interfaces which most people won't ever need.
Another larger part of space is used for full WiFi support, related firmware especially. When creating or converting an own image, it is possible to skip WiFi, but for best compatibility with headless use cases, it is included in the provided downloads: https://dietpi.com/docs/hardware/#make-your-own-distribution
- <100MB initial install - check
- read-only root -- in some cases? the diskless mode/lbu operation is neat, but it puts everything into RAM, and some boards may only have 1GB of it.
- ssh-only -- nope, have to connect keyboard/monitor to setup
- "full power of debian repo" -- nope
Alpine is great out for small images, but unfortunately still unusable for headless embedded devices out of the box.
If there are enough other people that would be served by that setup, publishing the result could work very well for everyone with your niche needs.
350~MB. Not the smallest but better.