It may or may not reduce boot time, depending on many factors. A bigger initrd:
- will take longer to read from disk, and bootloaders generally read at much slower speeds than Linux can (direct BIOS calls)
- everything in it will need to be decompressed, while mounting extensions will only decompress a small part, the index in squashfs
- no symlinking or copying, yes, which speeds that part up
It depends on your media, cpu and bootloader on whether the slower initial read + slower decompression add more than saving the symlinking/copying would remove.
What shouldn't be included and what can be included without messing things up?
Everything can be included if you're careful, read what the startup scripts do, and take appropriate action