The problem is that in order to understand how the system works you have to use it first. Now if you are one of the people running away from Reddit, it's natural to try to find the most popular server that provides most content to scroll through because that's how it it used to work.

It also doesn't help that join-lemmy.org highlights active users per month as a metric even though in the end it shouldn't matter at all.

There are two points:

1. Instance owners aren't ready to be a community manager and moderator. Also, a big instance costs much more. Many people just want to pay their 5$ in month and passively make their contribution.
2. Not all users are "power users". They want to consume content. To make federation successful, we should provide a smooth UX. Balancers, meta-account, something like this. Smart enough to require only one click and utilize all available resources.

Smaller instances are more likely to be abandoned/shut down, which currently means you lose your account.

Yeah, this is exactly my point. But I suppose a lot of people think that starting new instance is enough. But, unfortunately, it isn't.