If there are 10,000 log-in slots on the server and 4,000 of them are taken by AFk cheats, the servers capacity has almost literally been halved for no good reason. Those people are not present. They have no reason to be on the server taking a slot. Yet here they are. They're not going to be back for 8+ hours, then they'll play for 2 - 3 and go afk again.
If they were not AFK and people were logging out as normal after playing, The queues would move at a steady pace. Alas, They do not, because there are thousands of places locked that will never move.

Its got nothing to do with the number of created characters because under normal circumstances, They're not all logged in at once. Thats the problem. Characters that shouldn't be online because there is no player behind it ARE online. Take them offline and the queues are normal for an overpopulated server.
The restriction exists only to prevent additional players from getting on the server.