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Why would I go with Lute over something like Python if I was starting a new project?

Python is a mess compared to Lua (in my opinion of course). Lua and Luau are much smaller and more consistent languages.

Seems like mainly a way to write Roblox compatible applications that aren't locked in to the Roblox platform?

Not sure it even has to be Roblox compatible, but someone who writes Roblox code can take advantage of a familiar Lua variant.