His idea does not really need a bunch of players. It is all about the configuration.
For example. We discovered very early on, that the WW1 arena works best with about 10 to 15 players in it. There is no reason why a custom arena cannot be just as much fun with 16 players in it.
But to be more direct. You are not talking about the Melee arena, you are talking about the specific cap size of the arenas. Yes, some things need a large scale arena. Special events, for example, but a number of things work well in a small arena.
The 16 player limit is a good number for custom arenas and would work for what nuget wants to do.