I think you may have miscalculated.
For example, in the comedy genre there are about 672 watch instantly selections (28 pages with 24 movies per page). I'm sure some genres have more and some have less, but there are 19 genres. So if they averaged 500 selections per genre, there would be 9,500. That's not 17,000 but definitely more than 1000 choices.
Quite a few of the watch instantly selections are tv shows where you can watch individual episodes, so they may also count those separately to bump up their total.
We cancelled our satellite a few months ago and have just been watching netflix and hulu by hooking our laptop up to the tv. My only issue with netflix is the watch instantly option is only available on the main profile, so I can't set up a separate watch instantly queue for the kids.