You are only seeing that because your screen resolution is set so high. Most people do not have their resolution set that high. Sketcher's canvas size fits into the most used of those resoultions sizes near perfectly.
Users are only supposed to occupy 1/12th of the canvas each. This means that if a user exceeds that their art is subject to erasure as the canvas fills up. Naturally, any art left over after a user has already left is also subject for erasure. As an admin, you can enforce this, but do so using the guidelines that I have outlined above (i.e. the canvas has to be full with no space for new users to draw). Never forget the user.
Regarding the canvas size again, we will not likely increase the size of the canvas. When we get enough users, we might add more rooms. At the time of writing this; however, I see two rooms with a lot of users and two rooms that are completely empty.