there is less Bitcoin in LN than Wrapped Bitcoin on Ethereum (~3% of WBTC).

I don't think that's a fair comparison as LN wants to replace cash in a pocket wallet while Ethereum wants to replace an investment account.

WoS reports 16.4M transactions right on the front page, if they're telling the truth then LN should be at least on the same order of magnitude as Monero for the total number of transactions processed (I assume Monero has about 40M transactions: 60G chain / 1.5K tx size).

The real problem is vast majority of LN users are using custodial wallets that see everything.

Monero users exhibit selection bias, meaning that they won't suffer a wallet that sees everything simply because the whole reason they bother with the coin less capitalized than pepe is privacy. But if Monero was the top coin instead of Bitcoin, that same people who use WoS now would use Monero through custodial wallets too. In other words, neither LN nor Monero deliver all three of convenience, privacy and sovereignty.

I've mentioned Breez before, it's basically Phoenix without the privacy problem, but users have to sync the LN graph. And people would rather use Phoenix instead of syncing the graph. Those guys who don't sync the LN graph because it's annoying aren't going to repent and sync the Monero blockchain for the sake of privacy.

but there have been several major improvements to sync speed over the last year or two.

OK, good to know! But there's one more issue: non-instant settlement. LN settles on the spot, but Monero only sends transactions on the spot, the buyer can still broadcast a conflicting transaction later, pulling the rug from under the vendor. The current plan of Monero (and BCH) users is to pretend that it won't be a thing because now it isn't. But it isn't a thing now precisely because so few people use Monero on the street.