Apart from the downloading time, which varies depending on the connection - the vast majority of time during a windows update is spend calculating exactly what to update. Sitting on a 1gbps connection with a state of the art SSD, and it still takes a long time to update.
More likely because Microsoft knows that a lot of computers don't have that much free space, so only sending you what you need means using less of your disk space. Also, users often have data caps, so keeping the amount of downloaded small helps them there as well.
No, it's not about a trade off. The system needs to figure out what to update, and if it is safe to do. There was an article from MS some time ago on the topic. Most of it has to do with shared dlls I believe, but the details are a bit hazy.
