Everything was fine. I think the ideal number of player is 1000 or 1500 on a server. Then you can usually get the resource or miracle you want close to where you want even if you need to go a little farther to get both.
I'm on a server with over 2500 players. There is still plenty of room.
I'm guessing it gets crowded once you start getting over 4K players on a server, with the limit on cities raised to 21 (I don't know anyone that has over 16, and even very few have that).