I had heard that he created his own lettering system so that his words would be easily distinguishable from the actual words of the Torah. Is this just hearsay or speculation? If so, is there any reason given for why?
According to Marvin Heller (See page 62 there), the printers used a different script to differentiate the commentaries from the main text. (Tosfos also uses "Rashi letters" as well as many other commentaries)
He didn't. According to a Mansucript Preparation class I attended this year, what's known as Rashi script was the font the printer used. As a side point, the script used in some Judeo-Arabic written manuscripts - particularly the Rambam's handwriting - is very similar to Rashi script.
also because it takes less space, you can write more within the same page, meaning cheaper, smaller and more concise books
I was taught that since ink and particularly parchment was at a premium, it would make sense to fit as much writing as you could onto a sheet, and as such, what we know as Rashi script was born, as it was more compact than block.
I learned that it also used less ink than the traditional "square" script. In medieval times, when making ink was a long, expensive process using oak galls and other uncommon ingredients, it's easy to understand why a printer preferred using a font that used less ink.