Options Are Nice
Some people feel crowded on a server with upwards of 30 players. That's fine. They should have options (as they do). However, some of us come from MMORPGS and are actually *more* comfortable in worlds populated simultaneously by thousands of players. There's no right or wrong; these are only preferences. But to us, 128 players would seem a small thing to ask.
Would there be legal tie-ups? I don't know. It's likely Microsoft or Digital Anvil wouldn't care if someone was out there charging subscription fees to maintain awesome servers, because they could have chose this model and they didn't.
The server would have to be rewritten from what I understand, but it's an idea.