The TinyXP I have used is an automated install through answer scripts, I think. I think the entire install for me was like 100 MB and took under 10 mins. I think there is a Vista version now.
Is it warez? Since it is distributing the XP source with an embedded serial number, I would say yes. You can make your own legal version using nlite and your licensed copy of XP. As for where to find it... cough*torrent*cough