Many of these factions, such as mine, have not had a chance to grow. Being established just prior to the temporary loss of the world cut off building for newer factions.
Most people have wanted to join a faction with already fully established cities, and thus most people have ignored the developing factions, allowing for almost a week of recruiting for nations with established cities.
As minetown grows, it can be expected that other factions will grow as well, and limiting the ammount of land a faction may claim simply holds them back from further expansion.
On a related note, the more land factions take, the less factions there can be. Once no more factions can fit into the map, people will be forced to join existing ones, as opposed to having everyone creating their own, so no faction has any people or power.
This is the way it works in the real world. You find land, and claim it. No one told Spain they were claiming too much in the New World, except for Portugal, and they still got screwed over by the line of demarcation. The way I see it, if you find it, you can build on it, and once you've built, you can keep, as long as you have intent to build upon other areas.
Also, not all people will want to build in established towns. Having room between cities in your nation allows for the construction of private homes and structures between cities.
Southern might be persuaded to cut off part of our land, but seeing as no one else is in the South, there seems to be no reason. Besides, if we've built on our continent and have to cut land out, then WR (With 5 continents) should have to cut out some of theirs as well.