The more objects are in the game, the more processing power is required from the unit (computer/server)running it. So, low lvl mobs (lvls 1 through 80 )starting from keltirs in dark elf village, and finishing with ketra/varka mobs are vaste of processing resources. do we need them?
Server configuration, and hardware specifications are responsible (partially) for number of possible to maintain connections, and therefore are setting limits for the maximum number of active players. But this information is available for the IT engineers, so should be no problems with this part, unless that number is unknown to them.
Mentioned above computing power is influencing as well and number of connections maintained, but let's not go to deep into technical details (there are many ways to manage them in order to optimize use of computing power).
Synchronization of the events is the biggest challenge to the programmers, because different ping time to the players on the same area (including one party members) requires server to communicate with other active player characters depending on the player with biggest delay (ping).
So decision to compress all players in few locations is the most influential towards so called "lag". You always can check how global is lag, by moving to less populated area of the sever.
And as long as multiple characters run from same computer shares same ping, they have no more influence as if one character is operational (mostly).
That was only share of opinion, and is not intended to start a discussion.