I could be wrong but I thought a large portion of online games on XBox live were hosted on players XBox 360 ... If I'm right this would explain it.
If you are hosting a game on a dedicated server with adequate bandwith there isn't much of a technical reason why the XBox 360 could not have games that with 200+ gamers in them; but if you're dealing with the unreliable internet connections of users, and running the game on a system that is already running the client, it probably makes more sense to produce a game with fewer players in order to not have to worry about it becomming a laggy mess.
On top of that there is a certain level of practicality (from a development perspective) of not building a game around massive levels. If you're making an online only game that will sell 10+ Million copies you probably won't have to worry about this; but most online games lose the majority of their userbase within the first month or two after release, and if your game becomes known for being barren and empty because you can never get a full match it is unlikely that it will be remembered all that well.