Presumably this setup would also help with the cloud coverage issue due to the shorter travel distance and higher likelihood of redundant satellites to connect to.
But that requires the inter-satellite links be viable, which they aren't yet: the required lasers would survive reentry and they want the satellites to burn up completely on de-orbit so current versions of the satellites don't have them.
And yes, there are significant capacity limitations. Only the truly rural will get good data rates.
In theory a LEO satellite network could also beat transoceanic fiber connections since the high refractive index causes the speed of light in fiber to be only ~2/3rds the vacuum speed of light. But that would require satellite-to-satellite optical links which the first generation of starlink doesn't have.
Actually it is due to their distances.
Speed of light delays is something that exists everywhere, like fiber internet. In fact, speed of light is faster in space than it is in optical fiber. The problem is distance.
Your weird pedantic distinction doesn't make a difference. They're synonyms in this context. Obviously the difference is how much you have, everyone knows that.