My use case is creating microsites for hundreds to thousands of customers, allowing them to edit/create their own site. Currently it is set up with channels with auto-created entries for users and no permission to create or edit other's (to mimic a single). Having similar functionality using Multi-Site seems nicer so I can use actual singles and allow multiple users to that site. I noticed when creating multiple sites for testing, that they are all listed on the section page to enable/disable leading me to believe that having hundreds/thousands of Sites enabled is a use-case it was not made for. Are Multi-Sites able to handle thousands of Sites?

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I'd highly discourage this.

We've seen large Craft sites in the half a million to million elements (users, entries, assets, tags, categories, etc.) range. But even those maxed out at 20-30 sites.

Craft's multi-site was designed for sites that share a common information architecture and I'd say even 20-30 sites are pushing what the UI was designed for in the control panel.

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