Jade,
I don't think there are any scalability issues. A subsite and a package instance is just one object. Having 1000 objects of one type should be possible, and if there is an issue, its a bug. I know there are .LRN installs with 1000s of site nodes and dotlrn instances, so subsites shouldn't have any additional overhead beyond that.
The wins for arranging packages and assigning applications groups with subsites are good. Also it makes alot of sense to group packages using the same tools and make the tools to manage them consistent.
