Is there any good reason that a single moderator should be allowed to moderate multiple subs?

I'd take that as an I dictator of a power hungry mod, not a mod passionate about the topic at hand.

I can imagine few small subs where that would be fine but being mod on few of the bigger traffic ones would definitely be weird and suspicious

A few related subs, certainly. Someone moderating /r/projectcar is is probably a good mod for /r/mechanics.

But you can't algorithmically determine this. It's also my impression that a few of the biggest subs have all the same mods.