>To solve this, they should close sign ups. Why haven't they done that yet?

They do periodically closes signups.

>I would like to think this is true, but there are just too many frustration stories of confusion of 'which instance' to choose, losing posts due to admins (and followers) shutting down instances and having to tell your followers where to go next.

Except on bluesky, you don't even get to be confused because it doesn't support any kinds of moves!

It's pretty simple really, Bluesky hasn't magically figured out how to make proper federation work. they just say they're federated but in reality they're really just centralized.