Big reason for it is the big faction mentality. The small clans, and by small I refer to fief size, not numbers... get swarmed by the big clans, and it takes them forever to get the army, money, and gear to go take something. In the meantime as they grind, the castles, and the cities fall under big factions. So before you know it, only the big factions have anything, and they don't usually fight each other. Case in point is the current situation. Who's fighting who? No one. The bigger clans need to NOT wipe people off the map. it doesn't do anyone any good. It drives people away in all actuality, and poof, strat is dead.
Some could claim that the point is 'world domination' and that's how it's intended... but winning isn't everything. Variety is. Entertainment is. The more clans that hold territory, the more battles there are, and the more fun the whole thing is.