Eh, I can tell you from my 14y+ of experience in EVE that it isn't instanced. The SOL nodes (box is just how computer people call computers) running solar systems are separate, but there's nothing stopping you from jumping in. Only instanced context is the new abbyssal stuff (some of it is nice PVE, some of it is bs).
The "trick" of EVE being a space game, IMO, is not a trick, but a good design decission, taking into consideration limitations of tech. And while the systems are very empty (same as real solar systems), they are not fake. By that I mean you can go into any point of the solar system volume, which for some systems means 150+AU. Getting there is tricky, but once you're there, you can have a fight same as everywhere. I'm still sad about loosing my Astrahus (a small station) that was 60AU+ from the sun, and off plane, not aligned with anything
Hard disagree that instances grind to a halt with couple hundred people. Last couple of battles of around 200-300 people I was in were completely smooth, on a non-reinforced nodes. A reinforced node (as beefy server as they have, switched to deal with a single solar system) can handle, AFAIK, ~600 people in battle without going into Time Dilation.
According to
this press release the latest big battle had 6.5k players concurrent (i.e. shooting at each other at same time), with 8.8k players taking part in the battle in total. According to
their tech stream it was Time Dilated, it was bit laggy, but general consensus was it was playable (though not enjoyable unless you're in command).
The biggest battle I was in personally was 1.6k, waaay back, and I think before TiDi. Laggy as hell, but you could play, thanks to EVE not being a twitch game.
So if you call seeing 1k+ players blasting each other at same time "an illusion" of massivness, then EVE is a bloody Houdini of it.
(side note: EVE is far from perfect, and can be totaly sucky sometimes (e.g. the failure of CCP to deliver content in Pochven), but it's a great place to find cool and interesting people, and have some fun. Best corps I've been have culture quite similar to Codex)