> Am I missing something or is this WM/compositor more suitable to smaller displays which can not show all that many windows at the same time?

IMO smaller screens are where it shines, but you can also vertically stack within a column in Niri for similar density compared to tiling if you want.

> I keep track of which terminal goes where based on (among others) location.

I think this is a pretty nice benefit of Niri actually, having a second dimension to work with makes it much easier for me to keep track of windows because I can reduce the total number of workspaces and instead rely in part of relative location to other windows without being forced to fit all of them completely on screen. When I don't need my full screen real estate I often set up splits so that a little bit of the offscreen window is still visible and it makes it effortless to remember whats there.