MySQL: Does the “length” setting affect table size in bytes

Does MySQL have any support for custom data types?

Simple answer: no

Is there anything remotely like this on any database engine? I mostly use MySQL, but I am curious if this has ever been implemented, short of making the application call a function like the INET_ATON function.

Oracle has CREATE TYPE which is analogous to some degree to a OO class, including features like member functions and inheritance

Postgres has CREATE TYPE which is a bit less like OO classes (no member functions or inheritance) but are incredibly flexible and useful, even allowing you to create new base types. There is also CREATE DOMAIN which allows a form of inheritance or sub-typing and basically extends a base type with some constraints. Postgres also has quite a few interesting base types by default, eg inet and geometric types. In Postgres one can write an extension in C for a custom datatype, such as in this example here with base36 data type.

SQL Server has CREATE TYPE which allows you to create a custom data type based on an existing system data type. For example I could create a type called SSN which is basically defined as VARCHAR(11) but this way I don't have to remember how big a field it is.

3 letter ISO currency codes are relatively small, so there is little overhead in using them as the key for the reference table. Having certain items such as dates, GL codes and other analysis codes and currency codes directly on the tables is quite convenient for people reporting off the transactions and balances. Many accounting packages - even big players like Oracle Financials - do it for this reason.