Except there are a lot of democracies / republics in BT at the planetary level. Prior to its dissolution, the FWL remained a republic at the interstellar level. The Captain-General, prior to their 31st Century emergency powers, had limited influence over most operations of the nation.
Unless you split hairs on the definition of "democracy," they're quite common in BT and the House Sourcebooks and Handbooks have said so. Explicitly and directly, and I quoted one on that matter earlier. I also gave direct examples of planets with "democratic republics."
I keep coming back to the size and communications issues. It's not a direct correlation, I admit, but when you look at colonial-era America you have a nation comprising a relatively small population spread out over an enormous distance, such that communications from the capital (Philadelphia) to major metropolitan hubs like New York City might take 4 days to 2 weeks depending on weather conditions, and heaven help you if you have to get word from Boston to Charleston in a timely fashion.
So is there a upper limit on how large an American style, representative star democracy could be? What I keep imagining as viable is a nation that has sufficient JumpShip assets so that any system is within a double jump of the capital, meaning emergency communications are never more than the time it takes to transmit the message from the surface to the jump point and vice versa. Increase the pool of dedicated JumpShips and you increase the potential diameter of the nation via the introduction of command circuits.
Naturally, in a post-Succession War Inner Sphere there probably aren't that many JumpShips available for just communications duty, but I don't see why something the size of the Terran Alliance, St. Ives Compact or post-Tukayyid FRR wouldn't be viable.
(And yeah, given that all of those are ex-realms at this point, that might not be the best of examples...