I also agree that there is no point in having more than one, maybe two, people per faction. As much as many will say it 'limits' players, having played second had to someone before I found it COMPLETELY boring. No offense to them, but unless you have a say in how orders go about, you quickly get detached from the world around you and give up.
As for minor factions, I think there should be a 15 system limit as to who you can play. I have written up a set of rules I thought would be good for a 3025 game (got some feedback on it, and would welcome more, by the way!) where I was able to bring about enough RP for small factions to care, but even then it is a 1/week log in at best for them. If we do a 3039-era (or earlier), I think the powers should be:
FedSuns
LyrCom
DracCom
CapCon
FWL
St. Ives
Rasalhague
Magistracy
Concordat
Outworlds
Everything else should be GM controlled, or 'mass controlled' by a player or two, with no two factions controlled being less than 100 ly from each other. For example, one player plays "Pirate" and randomly launches raids on people, controlling groups like Tortuga and the Oberon Confederation. People who simply don't care about each other, but fill a similar niche. Overall, a 15-20 player game is about all you'll be able to sustain in this environment, which does kind of go against the spirit of the FGC, but I think it tightens up the system.
If you want to have multiple players, the only way to really 'engage' them is to give them a named PC and a fraction of the national RP budget to play with. Someone having Regulus would get maybe 2% of the FWL budget, but it is enough that they can build up to something crazy (building secret factories, etc). Lots more work for GM's, but more interesting for players.