I'd much rather have cities and towns with hundreds of NPCs than the ones in Skyrim with 20. With larger cities, you can still have those 20 NPCs all with unique quests, among the other NPCs. If anything it would make searching for them a game play mechanic in its own right.
DO NOT TRY ARGUING WITH ME I DO NOT CARE - FUCK OFF.
The need to give every single NPC unique lines results in them all being shallow as hell and usually having only one trait. I was gonna bring up how Nazeem's only characteristic is that he's snooty, but he's actually an exception because he has any personality at all. Most of the NPCs just exist to give you exposition. Making the cities bigger and filling them with random NPCs is much more immersive than making a "city" have three buildings and seven NPCs who have nothing to differentiate them