So if a guy wants to play extremely long games where a size 7 colony won't take 30 cycles but thanks to his min-maxing will only take 20 cycles to complete.... shouldn't we let him have it? It's not a massive upgrade and he won't feel like he's arbitrarily locked out of having a "real planet". It's just that like a "real planet", it will happen over a course of decades or centuries and not just years.
The idea is to stop people from forcing themselves into gameplay that is not fun, because they feel they have to play "optimally" or "max out everything". If just some people who really want to hang around in a save for 50 years were to see the colonies grow to size 7, that would not be a problem. But if people hang around in the game, actually bored out of their mind, just to see that number change from 6 to 7, that's bad game design.
"Just forbid it completely" is the nuclear option, though, and should be used as a last resort in the most extreme cases only.
Way too many games do this way too often - completely forbidding players from doing certain things because there *may* be a difficult design decision somewhere down the road there.
In this particular case, I think it's extremely important that we be allowed to potentially grow colonies as large as all the pre-existing factions' colonies (given enough time and economic boom to draw in population), even if it is not required to succeed within the main gameplay loop, or likely to happen in any average campaigns.
A hard-limit that entirely takes this off the table from the very get-go is kind of taking me out of the "your faction is a real faction" vibe that I want. One of the most amazing strengths of this game is that I am using the same ships, the same mechanics to equip those ships, to staff them with officers, etc. as the NPCs. For the most part it feels like I am playing the same game as them, and that is good. Similarly, the core fantasy of being able to start my own faction is that I am playing on an equal playing field with the big guys and can also get to where they are if I surpass enough hardships (which is also what makes starting your own faction in mount&blade so satisfying, RP-wise), but it kinda takes some of the wind out of the sails if I know from the get-go that there is an insurmountable upper barrier that cannot be surpassed no matter what.
I mean yes, sure, there are some extremely obsessive players who inflict harm upon themselves if given freedom, but that is a poor excuse to take things away from ALL players. Because you cannot reasonably sift through every single part of the entire game and cut out or limit stuff that promotes obsessiveness, and do whatever needs to be done to your game to ensure nobody hurts their enjoyment by obsessing over something. If you did, what would even be left of starsector? Every part of this game is obsessiveness-bait.