The login cap was introduced as a direct result of the instancing server(s) being overloaded.

Phase 4 has a level 20 cap so there were only a limited number of dungeons/instanced events available in P4.

But when the cap was removed for early access that meant there was a ton of people now doing instanced things that weren't in P4 and thus the instancing servers all fell over quite horribly during the EA weekend. Since their login limitation was implemented it seems to have "fixed" the instancing issue, but I doubt anyone is calling that a permanent solution (from the forums it's obvious that we the players are unhappy about it!).