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So I agree with a lot of the general concerns in the thread but I actually decided I don't like the word "zerg" to describe the problem.
The problem, I think is OVERGEARED and OVERLEVELED players.
If 7-8 level appropriate people want to get through a boss or remove a curse from someone that's seems fine to me.
The problem is when you get even 1-2 overpowered players in the middle of the group. DPS tanking because lolololol.
That RUINS the experience.
A mass of players of appropriate level that loses the first 3 tanks is part of the fun/failure.
Solution-
I would be more inclined to just turn off loot drops if your gear and level score is too high.
Give them a status like you do when people have 2 skills mismatched in level.
"Why am I not getting any drops? Oh I'm overgeared... maybe I'll switch to my offspec or downlevel my skills and gear a bit, but gosh I'll have to play a little better"
That would be the best result in my estimation.
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From what I have read, instancing is not supported by the game engine. To me that makes the talk of instances moot.
I've played two MMOs prior to P:G, almost extreme ends of several axes of design. EQ2 (set classes/defined roles/multiple shards/rare pvp/heavily instanced) and EVE Online (no classes/skill based/single shard/no instances/pvp anywhere). I feel to make this work well without instancing there will need to be a -lot- more zones available so that people can spread out and not crowd each other. Maybe some mechanism that allows small level-appropriate (to the parent zone) dungeons to spawn at random? A couple minutes after the chest at the end is looted, zone despawns.