This. Or upgrade their infrastructure to handle the larger load. One problem with this, though, is that in multiplayer gaming, no matter how the infrastructure is, if you have too many players in one area, things start to crash. Blizzard's main concern with allowing too many players to be logged in, is having too many people on at once in Origrimmar for example. This problem can be solved by better design. Make every city equal. Make it so that people have to spread out. In Wrath they learned their lesson from the previous expansion by having two starting areas instead of just one. That helped.
I don't understand why Blizzard doesn't have server transfer rules to help the inbalance settle itself. For example:
If you're on a low pop realm, you can have a 1 time free transfer to these medium pop realms (or realms that never go above high).
If you're on a severely imbalanced server like Stormrage: Alliance can transfer for free to Horde.
If you're on a high pop realm you can have a one time free transfer to any of these medium or low pop realms.
etc.