Hi, @chryket. There are a few things I want to clarify.
The first is that while Netlify Large Media (NLM) is a Git LFS storage service (and more), you are not required to use it if you are using Git LFS.
You can also use the Git LFS storage at your Git service (GitHub, GitLab, Bitbucket) instead of using NLM if you prefer.
If you are using a third-party (non-NLM) Git LFS service, to download the actual files during the git clone, please set the environment variable
GIT_LFS_ENABLED for your Netlify build environment.
Second, regarding where to store those files in the directory structure, I don’t think there is a right answer from the Git LFS perspective (NLM or otherwise). They should be stored wherever it makes the most sense for your project.
Similarly from the web-hosting/CDN side of things, I don’t think there are any performance differences which depend on which directory/path is used for LFS files.
Finally, regarding cloning the repo, one thing to consider is that if you use NLM your Netlify username and password are required to make a
git lfs clone of the repo to get the actual files. You can
git clone and get only pointer file if the repo is public, but to get the actual files from our service requires your credentials even if the repo itself is public. So, if you want other people to be able to clone your full repo including the actual contents of the LFS tracked files, then using NLM isn’t advised. This limitation won’t apply to public repos using the Git LFS service that the Git service itself provides.
If there are other questions about this, please let us know.