The issue with the instanced dungeons is not that they are instanced, it's that they are on a time limit. They could easily make instanced versions of the level 20 dungeon with no time limit, as well as other dungeons along the same lines. The 1 hour time limit in the instances causes people to be stressed out about finishing fast enough and thus rush through everything. Remove that limit and dungeons could be however large you wanted, as well as instanced.