It was definitely the peak. I was heavily involved in several communities, and also ran plenty of other desktops environments, but XP had the largest following by far. The sheer number of websites devoted to skinning XP was astounding. Popular websites had thousands and thousands of themes. Winamp 3 was thriving too.
With fluxbox you had over 1000 themes. And winamp skins worked on xmms.
Also, fvwm was so distinct that you could have tablet like setups before even tablets existed, even with those infamous thumbnail minimizations, but in 2004.
Speaking off shell replacements: Are there any worthwhile ones today? I know Cairo, but it's "meh". The windows default shell is just buggy and glitchy as hell (even though I generally mostly like it - a version with fewer glitches would be enough for me, really).
I did run LiteStep actually, it's still not nearly as much customization as what is possible nowadays with modern DEs.
LiteStep is amazingly customizable and versatile, but it doesn't come close to being able to, for example, define pixel shaders in a theme, or being able to easily change any UI element anywhere using simple HTML/CSS, or completely switching paradigms by just changing around a few dotfiles.
It was most definitely peak customization.