The word 'dungeon' in the game was derived from a tabletop role-playing game 'Dungeons & Dragons'. As the game evolved, in most cases, the word 'dungeon' represented a private zone or a parallel space where one could explore, adventure, or complete missions.
No one but you and your teammates could enter this private zone.
There weren't multiple servers or channels in the system version of the game, but Hendon Myre was as large as any city in the real world. The adventurers walking out from the spawn place didn't crowd the city. In fact, if not for the many pedestrians and NPCs (non-playable characters) including adventurers and merchants who were thronging in the streets, the players would find this huge city quite empty and cold.
Also, the players had to travel in horse-drawn carriages between places. If they walked, they wouldn't be able to finish a few simple quests that required running around even if they had eight hours.