As to why one would want to keep the number of mods down, have you guys ever been on a forum that had too many? It's not pretty, and just one person going on a power trip can cause serious problems with a community.
Yup, it really is a case of 'too many cooks' when it comes to forums and a large amount of moderators. I remember when I became a mod on the 1up forums a few years back and it was really hard because there were about 15 of us in total, which made for a lot of clashing and disagreements. I ended up leaving the whole site because of it actually. It totally makes sense to keep the level of mods at a minimum.
The spam shit is still pretty damn annoying though. Grrrr, etc.