How many people interacting together would you consider "massive"? Other than large PvP battles (which I generally dislike anyway) and large raid events (where any more than 30 people tended to be a mess to control) I am not sure why you would need or want several hundred people in one area.
There is no "need" for several hundred people in one area...its more a "want" several hundred people in one area.
As to why I want that..its fairly simple, its because all the MMOs which I have considered to have been the most fun of all the ones I have played in the last 13 years have been ones which werent "instance" orientated, ones which did indeed have several hundred people in one area. As those are the ones which I had the most fun in, its why they are the ones which I still "want".
Its simply a matter of taste, for example you say you generally dislike large PvP battles whereas I generally like large PvP battles. Some of the enormous several hundred people battles in Daoc for example were mind blowing
To give some other examples, I remember a time in Daoc on the Guinevere server where a very well known and well liked player died (several youtube videos were made in memory of her which became quite popular) , a memorial was held in game and several hundred players turned up , from all different factions, at the memorial. That wouldnt have even been possible in some of the more heavily instanced MMOs. Another example comes from UO, where a regular player run "festival" event was held near Skara Brae on the Catskills server, it became so well known and popular that even GMs from the game turned up to participate. The last one I attended had almost 570 people at it joining in the events. Again..in more heavily instanced MMOs, that would never have been possible.
Its a lot to do with taste of course, lots of people are very happy with heavy instancing in MMOs (often the people who never had the chance to experience larger sandbox/no instancing style MMOs) , lots of people would like to see more MMOs released which lean away from heavy instancing. Just taste. Thats all.
I'm not sure there is an exact figure I could put on how many people qualify it to be "massive" though..I mean someone mentioned BF2..what was Battlefield 2, was it 64 a side max? 128 people...would we consider that to count as "massive", does that mean we can legitimately declare that BF2 is an MMO? I suppose you are right, it would be in the several hundreds, though I'm afraid I couldnt be any more specific on the number than that.