It's a lot easier to dump out a pre-recorded audio stream (or even generate it with a simple modem) than it is to interface with the C64's expansion connector.
The simplest PCB designs for C64 cartridges requires fewer components than the datasette emulator pictured, or you can buy a ready-made more advanced one with a 64K eeprom for ~$20.
Certainly the whole thing is awesomely bizarre, so not criticizing the choice. It just seemed to make things more impractical since it adds the requirement of the "play" button and pressing keys on both machines and waiting for the load on startup instead of just turning them on.
But then again practicality isn't a high priority for this thing.
I'm guessing he's using a variant of his own Qwertuoso program for the playing, and it's tiny, less than 4k. Even with the horribly slow default C64 tape loader, that would be about a minute.
Linus is one of the demoscene's experts on fastloading too, so he may not use the default loader!