This new system was planned by the DBO G Staff months in advance, in which it was mentioned in the Open Beta 2018 FAQ, so the idea and feature wasn't exactly created "on a whim".
Before Open Beta, it was predicted that there would be issues with the preliminary round and it's exceeded capacity (due to the high server population). Obviously increasing the number of participants each round was experimented with and was tested because this would have been the easiest solution, in which it was found to be impossible as it would crash the client. The client in regards to budokai can only fit so many participants.
and how about spreading budokai throughout the day so players from different timezones can participate?