I think they did cluelessly over-size it - but I'm hoping there is some way it can be explained away - maybe Soval was simply wrong, about it being 2000 light years across - even a Vulcan Ambassador should know more about space than that - but perhaps by 'across', he meant volume in cubic light years (which reduces it's size massively - too much infact).
Also, Earth's destruction of the Expanse would have been a matter of public record in the Federation, one would think
Out of interest, from another thread:
More and more, I dislike the way the Federation was presented in later works, as a homogenous mass of colonies, outposts, relay stations, thousands of ships, etc, where travel between one member world and another was as mundane as taking a flight from one US state to another on business. It implies the very kind of unethical thinking we engage in today; colonise everything, build stations everywhere, in order to deprive rivals of it's potential value - that isn't how Starfleet operates - instead it's more of an 'as needed' situation.
TOS, TAS, the movies, and early TNG, all present an organization that is more separated by lonely distances, and less like a nation state in space - i.e. without solid borders. Perhaps a foreign ship can traverse much of the Federation without ever being seen - just by staying out the sensor ranges of it's widely scattered member planets.
It makes more scientific sense, because there are 200,000,000,000 to 400,000,000,000 stars in the Milky Way, with only one in 47,000 planets bearing intelligence (according to Archer's estimate) - and so any space empire is going to have to be a few lonely star systems, separated by masses of systems, some of them pre-warp civilizations, or hostile planetary governments.
The idea of a Federation with definite borders, i.e. the Cardassian-Federation DMZ, the Romulan Neutral Zone, the Klingon Neutral Zone, are probably misunderstandings - the border systems are still just spheres hanging in a vast void, perhaps with very powerful long-range sensors - not a literal line on a map of the Milky Way.
Furthermore, DS9 and TNG seem to inadvertently confirm that the 'core' of the Federation is small, as the ships readily traverse it in short periods of time - indicating that there may be a compact core of founding members at the heart of the Federation - Earth, Vulcan, Andor, Tellar, within 15 light years - Arcturus, Denobula, Betazed, Delta IV, etc perhaps a bit further out.
The explaination for Picard's quote of 8,000 light years in First Contact is that the Federation (being an alliance which is joined voluntarily), has odd members that are much further out, encountered by deep space missions like Kirk's and Picard's - plus the odd lonely outpost like Delta Vega.
This is the most compelling theory that I have ever heard
- it is logical, scientific, and explains everything seen in the show. It also explains the 'feel' of JJ Abrams Star Trek, where Earth only learns about an attack on near-by Vulcan via Planetary Distress Signal - even relatively small distances are huge and empty, not full of thousands of colonies and ships.
I've grown to really dislike the idea of a Federation that is just a block of territory. I certainly no longer ascribe to this notion of a crowded Federation that covers 10,000 light years - this isn't Star Wars
Other empires may be more compact than the Federation, because they expanded via conquest, expansionism, colonization without ethical restrictions, etc. But, even the Klingon Empire, I think, may be a very spread-out state, because expanding like a colonial empire, they would have only come across suitable prospects for conquest about as often as the Federation finds suitable members.