I think there are actually a fair number of things to do as a knight; as a knight you can still lead an army, you can still take part in intrigue, you can still be a diplomat/ambassador, you can still take part in religion, and you can still roleplay. You can still be elected to government office in realms that have such elections (which is partly why I think many people enjoy republics, just look at Barca's noble count). The only thing separating a lord from a knight is the necessity of managing food (which can be delegated) and the ability to move the region to another duchy or realm.
When the knight game gets boring is when the upper echelons of control (Dukes, Realm Council in particular) don't include the knights in councils relevant to their interests. So part of the knight game being fun is other players allowing you to participate in that higher-level planning and foreign policy talk; an old character of mine was in Astrum's high council and it was great, but when all the dialogue takes placed behind closed doors it is significantly less great for everyone else.
Speaking as a player who has played in realms with extreme inactivity and low player count (Niselur before Arrakis's rebellion was boring), having more nobles concentrated in a smaller area is extremely positive, because when your realm is 10 regions and you have 12 nobles but only 4 of them ever have anything to say the entire *game* is not fun, not just the knight game.
