While I can't imagine five people in a studio, it's a win for Disney financially so they don't really care what we think.
As thisismyusername points out, there were many families who would not buy into
DVC if it meant purchasing enough points for a 2BR. They are looking for cost savings not spacious accommodations so they are happy to be all in one room. This opens up a new group of people that DVC can finally sell to. (And if, as you say, they need more space when the kids get older or they try a larger room one trip and realize how nice it is to have that extra space, perhaps they will add on more points!)
Second, at the hotel DVCs the shared costs for the front desk staff, pool, transportation, landscaping, etc. are shared based on the number of guests in the DVC rooms vs the number of guests in the hotel side. Increasing the official occupancy in the DVC rooms should result in increasing the number of guests on the DVC side, allowing Disney to shift more of the shared costs to DVC members.