Because there isn't anyone to lead those kingdoms. Leading is hard work and monarchs tend to burn out and quit. When you just throw 21 random provinces together, 99% of the time, you're not going to just luck into a functioning kingdom. If you make the top kingdoms cut 4-5 players, they're still going to be the top kingdoms because they have the best leaders. Lowering kingdom sizes would do nothing to balance the competition.
The first and last things are untrue. The only thing you need 25 provinces to compete for are the land/nw charts. You'd have a bit of an advantage in the honor charts with more provinces, but there's no reason you "can't" win.
And the last point was literally the opposite of what I said. Recruit quality players and they'll stay and make it easier to keep 25.
Edit: for what it's worth, I have no problems autofilling kingdoms to 25