Rocket Equation Tyranny

You don't need to lift it from earth gravity therefore less fuel is required.

Does the rocket equation still bite to hard if fuel production is outside Earth's gravity well?

This phenomenon is called "The Tyranny of the Rocket Equation": https://www.nasa.gov/mission_pages/station/expeditions/exped...

Doesn’t the reduced gravity make a huge difference compared to launching from Earth? Is this not the biggest factor? (Zero expertise here, genuinely curious)

You can't escape the rocket equation.

Not much. There's a saying that once you get into orbit you're "halfway to anywhere", and required fuel is exponential in required delta-v. Just look at the sizes of the 3 stages of the Saturn V for a comparison point.

Why is it much more efficient? Doesn't it still have to carry the same mass up to the same altitude and velocity?

Yes, but you'd have to get it into space first. Rocket equation tyranny is expensive to get past.

is there a form of transport that is _not_ limited by the rocket equation?

What you're missing is the rocket equation. The less weight, the less fuel you need and the larger your payload. We should trust the decisions of these experienced engineers who are deeply familiar with the tradeoffs involved in spaceflight more than our own intuition.