This idea works well, but for 5000+ players
Not 500... It's good for huge MMO's like Eve Online which is already using that kind of system. There is also proper name for that, but I can't remind it right now :S
Also this idea is only successful when you own more than one dedicated, so you can balance the traffic between dedcated servers and not between instances on same box... And i doubt many people can afford having more than 1 box
That's why I hitted going on optimization of otserv instead of splitting it into instances of same server. Maybe you should do same? I don't wanna flame, or anything alike. But Tibia Server's aren't good example of using this kind of stuff.