Well you have to admit, it is a huge amount of people for one small area -- 3-4+ raids a side at peak, and it lags out everyone in northrend, adversely affecting everyone that isnt even in WG! Cost/benefit analysis would say they are doing the right thing by trying to decrease that number. I believe other possible "fixes" are along these lines:
  • Get really beefy servers for Wintergrasp alone -- cost lots of $$$
  • Increase network capacity -- they already have huge network capacity. cost lots of $$$
  • Decrease amount of traffic going to each player by dropping the distance you see players and other objects in the zone (this would subsequently improve your FPS) -- possibly save $$$ on bandwidth, but would only alleviate so much of the problem, and would piss people off if they dropped it enough to make it workable.
I don't know if the bottleneck is server CPU or bandwidth but neither would be easy to solve without dropping the number of players in WG.