We're definitely in a position where some instances roughly trust the others, but not fully.

Federation is an act of "I mostly trust you".

So what would a Mastodon look like if we pushed that further? What if instances could maintain a shared DB of public posts, and relegate instance level and private posts to their own smaller DB?

The fediverse would remain resilient as long as each group didn't grow too large, and most server storage for this type of data is resilient regardless.

We'd get the benefit of scaling, and reduced waste, with a higher benefit to communities that work together. Coming together reduces server costs, workload, but doesn't cause issue to the identity of each server.