The problem isn't so much scale as it is perversion of democratic principles. Our allure with republicanism over direct democracy is less philosophical and more about protecting the interests of the wealthy against a perceived darkness known as the public. It's basically the same tired old debate that existed in Athens some 2,200 years ago. Say what you want about democracy, but republicanism is 2 wolves and a sheep getting to vote who decides what's for dinner, and the wolf that is elected gets to pick the bones of both losers. Republicanism is also dangerous because it breeds a significant culture of apathy towards civic duties vs democracy which by definition breeds engagement.
People also have a misconception that democracy implies every little issue comes down to 50%+1 when this is not true: there are many forms of direct democracy, including demarchy, supermajoritarian, delegate, consensus, technocracy (the 'bottom' pool of voters sends a list of candidates, and the 'top' pool selects from them), etc. Even under the standard culture of today if the people had sway over decisions we would see marijuana and gay marriage legalized in all but a few states, reasonable abortion legislation, and an economic system that doesn't benefit the wealthy while tricking the middle class into hating the poor. Furthermore ideas like the NSA super-hosts are specifically engineered by systems where power is concentrated away from the hands of the common.
Framing the debate around federalism is archaic, redundant even.