Not all that tiny from the practical standpoint. Just go estimate how densely a fleet of a thousand ships would really be placed at an orbital altitude of a thousand kilometers above Earth - and then consider that a ship dropping from warp does so on a dime (viz. those many chase scenes). Medium Earth orbit should still be practically empty with a thousand starships waiting there, and quite safe for blind warping-in.
I suppose Earth could have parking orbits that ships warping in can book in advance but I don't accept that the Federation would let random ships warp into any old orbit they fancied just because the likelihood of crashing is low. We don't even know how likely meeting another ship really is since we don't know enough about how much traffic there is, although granted, it looks like Earth has very few starships at its disposal at any one time.
Still, how many lightning storms are there on the planet and how many people are struck by lightning every year? A crash is going to happen without steps in place to prevent it.
Still the parking orbit makes some sense. In most cases they would not want to violate a planet's 'airspace' so permission for a parking space in advance would make sense. Federation planets could just have beacons to guide ships in.