"To me local timelines only make sense if the instance has a very clearly defined group with some kind of shared access, e.g, a company that has an instance for use by its employees, or a club or organization have some kind of membership"

Wow yeah, this makes a lot of sense. It's too bad nodes became associated with niche hobbies or interests.

E.g. a fraternity/sorority that hosts a node would make perfect sense for a local timeline. I guess the only issue is that these organizations aren't permanent. So people would have to migrate, which isn't a thing for twitter or facebook. I know mastodon has a feature for this specifically but I think people would still find it too confusing if people's handles kept on changing.