Migration isn't possible right now but probably will be in the future.

This same thing was attempted on Mastodon and did not go well. I'm not sure if the coalition still exists but it caused a lot of community gracturing

Right, they won't care until they find out the instances moderation policy doesn't fit for them and then they're stuck with all their content on an instance they don't want to be on anymore

Users aren't going to care about server load. The only problem the users will care about is "Does this work right now the instant I want it to."

Having an entire separate service/microservice that load balances instances wouldbe very complicated to implement for what is largely no reason. If an instance is at capacity, close registration or switch it to invite only and direct people to a different instance.

There's also the option of doing something like the mastodon signup portal that just gives you a list of servers and a blurb about what they're about.

Making a series of different instances that are intrinsically tied together and controlled by the same mod team already has a name: A centralized network.

Short answer: Yes.

Long answer: Yes, definitely.