The problem with bigger raids in instances is lag. If you were ever in a full raid for a world boss, Dalanis memento raids, or an open-world instance like VN, you'd know that they are extremely laggy in this game--unbearable for some, depending on the hardware they're using.
I think revamping lower level instances would do a lot to improve the game, but I doubt they ever will. Bloody Gallery is the only low level "raid" instance I know of, and most people just have higher levels drag them through it nowadays.