...I guess i just did not explain enough, SE is merging many server and at the same time they say how they going to reborn dynamis, instancing was maybe not much possible pre-merging, keep in mind they will have free resource and is maybe the reason why they are merging, did you ever think about it?
Instancing isn't an issue of sever capacity. If you could have 64 people in a dynamis area (something that rarely happened after the first few months of dynamis' release), there wouldn't be capacity problems if there were 4 groups of 16.
The issue is the method by which FFXI events achieve the appearance of instancing. BCNM areas, assaults and similar stuff are "instanced" by filling the game engine's world environment with several copies of the same section of terrain, spaced out so that they arent in range of shouting of eachother. If one copy of the battlefield or assault area is in use, the game puts the players into the next one. There are only a few of these copies, and if they are all full, more people can't enter. Dynamis areas are much larger and also more complex than battlefield areas. The assault areas and WotG battle zones rival that, but they are newer and were designed with Dynamis's issues in mind (or, that's the impression we get). In order to instance dynamis, the zones themselves would need to be rebuilt, which would be a major undertaking (and it would also make the size of the data for the zones larger, at a time when the game is running out of disk space on the console versions)
Other games achieve instancing by using special server machines to handle the instanced areas, and give every group it's own bonafide private area to work in. The number of instances is only limited by server capacity (which can be reasonably increased if need be)
They cannot instance dynamis without changing the physical structure of the area in the game data itself. This is something that they are unable or possibly unwilling to do for some reason or another (The fact that there are invisible walls in Upper Jeuno that have been there since the beginning of time can attest to unlikelyhood of physical changes to the zones).
I'm not sure what the problem was with my last post, but I hope this explanation is helpful- I really didn't intend to be rude.. This was discovered by people who analyzed the data files, explored the game's areas in model viewers, etc. Mordion Gaol, the game's jail for instance, is literally made up of a bunch of small "cells" stacked on top of each other out of shout range. This is well known by people who have analyzed the game.
The one thing I could see them doing, is turning different groups of people in the same area invisible to eachother, something that is done during Ballista matches. Players and monsters not participating in ballista are invisible (and don't collide with to the people that are in the ballista match). This could work, but might result in lag with no visible explanation to the player if lots of other groups (which are invisible) are physically near eachother (because the invisibility is done client side as far as I can tell- but i'm not 100% sure here)

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