The thing really is - the servers can handle a bunch of people, but at some undefined / unknown levels, they start fallling over pretty bad and stupid shit happens. These days you can have several times more people on radar before you actually start feeling the effects compared to what it used to be. I think the bigger problem right now is not so much the amount of people a server can handle, but the very ungraceful manner it behaves with too many.
Remember when present port Atlantis was new?
There are different kinds of problems because of many people, that (I guess) are unrelated by itself:
1) Higher risk of crashes (CTDs). Not sure if there is a direct relationship, but rather, that the more people on radar, the higher risk there is of CTDs. Solution: More stable client code. My guess is that there is some bug related to avatar rendering, or "de-rendering" (for instance when a dead person leaves radar).
2) More lag because of server load. (This one is fairly easy to understand, more people on radar, the more the server has to work to broadcast all movements, and the longer it takes for client to get updates of all people.) I don't Think this is a big issue as it sounds.
3) Eyecandy: Smoke from VTOL Engines, smoke from rockets, fog in corridors, fancy claim rod, grass straws on field, smoke explosion from Chalte's fireballs, maybe waving trees. Things that eats Power from the GPU. In latest VU we also got windows with shimmering frames and fade-in/fade-out in menus that probably doesn't add to lag by itself but makes game feel laggy.
4) "Show-up delay": The time it takes to render avatars. I don't know if it's fixed, but if same person comes and leave radar range, that the client has to re-render them all the time and with 100s of avatars it can take some time with less CPU Power. Don't know if it's fixed, but in VU10.9 rendering of avatars had priority over radar, so on TP-runs you could see a tail of avatars on the radar that really were somewhere else but radar wasn't updated because rendering of avatars had higher priority.
5) "Backend problems": Problem logging in ("timeout occured durign login process"), inventory servers (lag and "internal error") when moving items to and from storage, lag (say 30 seconds+) when repairing and using trade terminal, lag when splitting stacks (padlock on stacks). Teleportation lag (delay after you've used a teleporter and until you arrive, delay Before being moved to revival terminal, in some cases delay also when you charge-up TP-chip).
A special case of 5 is
5a) Auction lag. When you click auctioneer and you after 30 seconds get an empty auction window, when finished auctions aren't executed or removed from list timely. (Actually recently since a few Days auction feels better).
For this landgrab, I'd say it was (5) that at least for me was the highest problem.
One odd fix that would be nice would be the option to set font for main chat window. Why? Because, if you run the game with lesser resolution, the main chat window feels like it takes more than half of the screen in with. You *can* make it smaller, but if you make it smaller than default, after a while you tend to miss things becase it doesn't scroll down to last line. Being able to use a fons like 7p "small fonts" the chat window would take less relative Place on screen, you'd be able to run client in say 1024x768 and it might feel faster, in tight situations.
Another odd fix I want would be to tbe able to have at least two different graphical set of options, for instance one for Close-range hunting (with low settings, to reduce lag), and Another set, for instance for space (high item quality to see space stations) and screenshots (for high Picture quality). And, maybe for instance, a third one to use at beacon missions (=the low resolution one but post processing at medium instead of safe mode). Then, being able to switch between settings witha hotkey. Additionally, together with this, an option when set that the pre-rendered things like inventory Icons are *kept* when you change settings, so that inventory (storage, content in boxes, ...) doesn't have to be re-rendered each time you do a tweak. (You don't want all content in storage to have to be re-rendred if you just arrived to Twin Peaks from space, when there is 20 people around that also have to be (re)rendered...)