We have always sent out the adverse action notices on withdrawn applications, and I know we don't have to. Is that good practice? Also, does the notice need to be sent if after credit has been pulled and note created, then customer withdrew the app?

There is no requirement to send AANs, regardless of whether or not credit has been pulled. Document file with the customer's withdrawal and move on. Caveat: make sure you document the withdrawal, examiners will look for that.A copy of an email is always good. AANs are for when the BANK takes adverse action, not the customer.

If the terms they've applied for were approved, there is no need to send an AAN and (in my opinion) you're giving examiners one more thing to pick on.

However, if even the smallest detail of the original terms were not approved and they did not expressly accept your counter offer then an AAN is warranted.

An application is either;
Incomplete (which requires written notice within 30 days) or;
Denied (which requires written notice within 30 days) or;
Counteroffered (Written AAN is still required if not closed within 90 days) or;
Accepted on all terms and conditions applied for (this is the only one that does not require written notification if not closed)

If you do mark an application as withdrawn, MyScamper is correct, document, document, document.