Well, there is potential, and 1K in size is MORE than enough to be formidable in a Star Wars fleet battle. I think that what he is on about is how fleet battles are tracked and handled might have changed and I'm eager to see the rules for this myself.
Hell, the Battle dragon is a third of the size of an ISD. Newer and better ones are bigger, but not more than a kilometre in size. They dont' need to be bigger than a Kilometre in size to do some serious damage. Canon gives us something to go off of for Navy size and that's what I tend to stick with... I'll give us at least two fleets per planet (not an unreasonable supposition), which (by canon Hapan order of battle) is 160 ships (80 ships is considered a fleet to Hapans, according to Isolder) times 63.... I figure 10,080. That's the minimum size of the Royal navy... could be bigger than that at three fleets per planet... We know Isolder stated that the Consortium military consists of "billions of warriors, thousands of warships".
And as for faction status, I feel like we're getting the short end because of minority and all and frankly, we ICly have the ability to resist being steamrolled. We have the capability of remaining independent like before, so it's reasonable for not much to change if hostilities don't break out and the Sith leave us alone politically. But, the ball in their court right now as to whether they want to press their luck. Pressing their luck CAN produce interesting and lasting roleplay, frankly, which is why I'm not inherently against it. I just wanna be sure it remains fun, is all.