I think it's fairly uncontroversial to say that we absolutely do need a quarantine that keeps almost everyone in their homes, except for those providing critical services (medical staff, police, national guard, plus some needed amount of infrastructure for groceries, pharmacies, electricity, water, etc.). For the next 2 or 3 months, I fully expect to only leave home maybe every few days or week to go to the grocery store or pharmacy, like you see today in most of South Korea. It's just a question of when at this point, and the sooner we start it, the less disruptive it'll be in the long term and the fewer people will die.
So you're right, of course.
It also ignores the intention of the rule, which is to reduce unnecessary risk. If 1001 people in a single venue is dangerous, so is 999.
I imagine a function using things like transmission vector diffusion rate, windspeed, incubation period, critical care percentage, number of ICU beds, and such as parameters, and outputs the maximum allowable gathering size that will keep the spread slow enough that everyone who requires hospital recovery can get admitted. Public officials could then ban public gatherings greater than 80% of that number.
Seems like a paper describing it could be worth some academia brownie points.
At the end of the day you have to set the threshold somewhere. One could argue that a 500-person event is still risky, but a balance has to be struck between attempting to slow the spread of the disease, and not unreasonably restricting people's activities.
In this case, what's reasonable is certainly up for debate. No measure will be perfect, unless we want to start advocating for no gatherings whatsoever (public or private) and effectively putting people under house arrest. While that would stop transmission of the disease, I think it's fairly uncontroversial to say that would be an overreaction. But certainly it's up for debate as to, say, whether a 100-person ban would be appropriate, vs. 1,000, 10,000, etc. They chose 1,000. It won't be a perfect number, but it will help.