Two things make a game an MMOG in my opinion.

1. The world is persistent even after you log out. It doesn't disappear or reset just because everyone is logged out.

2. Players are represented in some shared area by their avatar. This would exclude something like the Diablo Battle.net but still include something like Guild Wars and DDO.

I don't feel like there should be any restrictions on a specific number of players per instance as long as its more than one. Also, keep in mind that "instance" can refer to a world instance (otherwise known as a 'server') just as easily as the more popular "group instance".