I can't remember how exactly, but I've seen 300 or so people in zones like WW contesting zones like ST or NTOV or simply key dragons and not seen issues that bad. Sure lag was an issue, and you had to turn particles off...but you could still function.
Might become a serious issue if guilds decide to contest and there are 300 people in zones where you are trying to fight a raid mob and simply DC repeatedly, they wouldn't even need to engage you in PvP to stop you from progressing.
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