doubt it. It being modified doesn't change much at all. The room was smaller but you aren't accountig the fact that there's depth to that room, meaning that the only thing we see is just the area where the entrance and part of the palace was, while the rest would expand inward.
About the modifications, remember that this is all a dream place. Dream areas change according to the dream of the one who own the place. Bretta's dream has a bajillion super powerful Zotes and her as the queen. White defender has parts of the palace. Then there's the whole thing with Godhome and Nightmare Grimm.
Basically the world in the dream changes with the person's dream. Thus, the king could've wanted the place to be defended and thus the buzzsaws appeared. Also we deadass don't know about whether or not there were buzzsaws in his original palace. Maybe it was some f-ed up training course for the vessels. Idk. Either way we don't know how it all happened and it is too vague to scale.
Sure, there's depth to the room, but at the very least the ceiling for the room is way less high than the palace, and the top of the palace would be reaching all the way to the upper levels of the City of Tears - we know this isn't the case because his palace was described as being far below the city and the king was known to be reclusive.
Its technically possible that the saws were there in the first place but at the very least someone who visited the palace, be it the Dung Defender or White Lady, would probably have mentioned the palace being like that, and it'd probably make navigation impossible for the regular retainers. At the very least I'm not convinced about it being a training method for the vessel because why the vessel would need to be good at parkour to seal the radiance is beyond me.
Also the palace possibly being able to fit doesn't change the fact that the palace in the physical world left behind broken gates, with it being described as "remnants" by Lemm and called "ruins" in the Wanderer's Journal, so it could be seen as the physical palace being destroyed and a new palace created in the dream world, which could be used as a destruction feat for the Pale King instead of a creation one.
As for the fact that its a dream, while yes regular bugs like Bretta or False Knight etc can have dreams, there's still a difference between having a dream and moving a physical building into a dream, then modifying that building to become larger. Further, the White Palace isn't in the King's dream, its in the dream of a Kingsmold, who have no mind to dream with in the first place, so the palace changing can't be the result of the Pale King dreaming it as different. (The Broken Vessel also has a dream despite vessels supposedly having no mind, but the Broken Vessel also reaches out for the Knight as it dies, implying that it does have a mind and isn't a perfect vessel).
Also Bretta's dream comes from a statue which for all we know could be a magic statue idk.
Higher beings in general have a different relationship to dreams than regular bugs, like the Radiance dying for real if killed in Godhome or the Grimm Troupe disappearing if the ritual is completed (implied that the previous Grimm has been destroyed by the hunter's journal entries about burning the father to feed the child), or more relevantly the Pale King being dead in the dream palace. Regular bugs, on the other hand, are separate from their dream selves and can be killed multiple times in dreams (like White Defender or Grey Prince Zote) or their dream self can be alive after their physical self dies (like most dream bosses, dream ghosts etc), so there's definitely a difference between their interactions with dreams and higher beings' interactions with dreams. As a result, dismissing feats done involving the dream world by higher beings seems a little hasty imo.
Finally, its important to remember that the dream world is still a real place, not 'just a dream', as its described as a "plane beyond the physical world" in the manual. The dream world was even capable of being split in two, creating dream and nightmare, though how that happened is totally unexplained (but likely involved the nightmare heart, a higher being once again affecting the dream world on a large scale). The dream world contains many beings like the dreamers and radiance which can effect the physical world, and many living creatures in Hallownest originated from dreams, like the mosskin and the moths. The moths in particular are described as able to "shape dreams" in the Dreamshield charm description, which if any regular bug dreaming does the same then this wouldn't have been worth mentioning as an ability. Otherwise, you could possibly argue that ANY dream in hollow knight counts as a creation feat, since having a dream is creating a real place in a different plane.
Sorry for the long, rambly post. In the end though you are right that this stuff is all super vague and not well elaborated, but at the very least I think its worth considering.
