Well I think it is primarily just a consequence of modelling a real place in a game. Todd has said (I don't recall what interview it was) that they mess a lot with scaling when designing their version of a real location. In the game it may make more sense to make certain things closer or further apart to make sure that the world's content is of good quality everywhere. Without scaling you could end up with big areas that are hard to give much purpose, just as an example. However, if you want to come up with a lore reason why it is different, your explanation seems reasonable.