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I guess the instance doesn't matter too much as you can interact with any content and people independent from your home instance. Personally, I'd recommend a medium-sized all-purpuse instance. Medium-sized because I think it's important for the fediverse not to concentrate everything on one or twp major hosts and very small hobby projects are probably more likely to just disappear out of a sudden.
Instance does affect moderation policy though. For example, someone who likes the vibe of specific "controversial" instances like hexbear would likely find many instances to be dissatisfactory because many instances are defederated with it. Someone may also have strong preferences about "free speech vs safe space" kind of moderation.
General-purpose medium-sized instance is probably "good enough" (especially if picking your first instance, with a willingness to migrate later if needed), but someone will feel more at home if their preferences more closely align with the instance they're on. For example, beehaw users generally seem to love being on there from what I've seen, and I think they would feel less at home on most other instances.
There's also value in making use of an instance's local feed in some cases (less so for most general-purpose instances though!). I participate in aussie.zone regularly, and at times it's a pain to use from a remote instance. For example, if I want to submit a new post, I have to manually check several loosely-related communities to make sure it hasn't already been posted to the instance (cross-posting intra-instance is not ideal imo). If I were a local instance user, I could just check the local feed, which most of the time I just end up doing anyway because it's faster than checking several communities manually. It would definitely be easier for me in that regard if I just migrated there or had started there to begin with.
I see your point with moderstion policy (hexbear etc.).
The aspect of local topics (aussie.zone), I see very critical for the fediverse. I see the same pattern here with the German-speaking communities on Lemmy. A huge part of them was historically hosted on feddit.de. The administrator of that instance lost interest in the project, downtimes soared and the instance is basically dead now. As an alternative, people founded feddit.org. Feddit.org is actively maintained right now but still the majority of the German content is focused on that instance. The communities AFAIK never grew again to the old size. If Feddit.org goes down as well one day (for whatever reason), I think chances are high that the German communities simply get lost as the frustratration grows everytime you start over again. Similarly, it would be a bad idea if every German was using the same German provider for their e-mails.
Personally, I'd prefer if Australian, German and every other 'bubble' (Solarpunk, Veganism, ...) would be more distrubuted across various instances. That makes the fediverse more resistent against outside attacks, internal conflicts, downtimes and less dependent on single instance administrators.
The decentralization is good if you can get the numbers high enough for the individual communities to be useful, but having them concentrated creates a mini network effect, where each user is automatically exposed to all of the local communities, which would be harder to seek out and find individually. So I think there's tradeoffs, and mostly-centralized and mostly-decentralized community-instance pairing both have pros and cons.
The reason I posted this was because I have been on .world and didn’t realize it’s run by people in Europe (wasn’t a thing I assumed I would need to know). Different countries will enforce different rules on their instances. The whole removing comments about jury nullification threw me off. I want to start building up some communities, but I’d rather at least my account be centered around an instance I can trust.