Server merge question

I know people want servers to merge, but I think that if the servers were merged together to just a small fraction then it would put off new players thinking that the pop is so small they're having to drop servers and the game is about to die any day.

WoW suffered the same a few years back, but instead of merging servers they expanded the battlegroup to cover several servers and then allowed for players to meet with each other from different servers depending on how many players were in the same area. This created less congestion in crowded areas and more interaction in less crowded areas so that players didn't feel alone and had others they could team up with.

So my question is can FFXI and its limiting PS2 engine handle this? If it could then this would dramatically improve the game, not only in creating more traffic in the less populated areas so players can meet other players from other servers to team up with, but reducing traffic in the more congested areas.