In order to get custom images to work on Waydroid, there are just a couple extra steps needed.
First, download the images manually from sourceforge, or use your custom built system.img and vendor.img produced from following the Compile Instructions. Then copy/move them to the following folder:
/usr/share/waydroid-extra/images/
Then we need to re-init Waydroid in order for it to use the custom images:
waydroid init -f