or maybe some other terminology would be better? lots of people get confused when you ask them to choose an instance, sometimes I think even the word "proxy", "host", or "hub" is simpler
the specific terms aren't my point, just a discussion to see if we can come up with a better name
"Instance" seems too jargon-y to me as well, and "proxy" is even worse. "Server" and "host" are probably a little more familiar, but are still technical language.
Confusion doesn't stem from individual words; people need explanations and examples, but, as an alternative to "instance", if you want to extend the "communities" metaphor, then "society" as a cluster of communities is a natural option, particularly since it relates to the widely understood concept of social media. Since most people using the Internet also know what a web "site" is, you could use the sibilant linguistic association to help cement the notion:—
This kind of language seems more intuitive to me anyway, although when I've tried describing instances and federation before now, I've likened instances to countries:—
but this has also meant stressing that your instance "country" doesn't have to match where you physically live, so a more general term probably would have been more useful.