I got the sense the design was intended for smaller on-demand needs versus strategically building out massive datacentersThis is absolutely the case. This was not intended to replace small, permanent DCs, much less massive ones. Think "I need compute on space limited offshore oil rig" or "I need some compute here for 6 months".
you'd upsize each unit to cut down on the actual number of units
I've been out of involvement in building out DCs for a long time, so my info is dated, but...
As I said, there are now other companies doing variations on this. The Delta unit I mentioned upthread is built into a (standard?) 18-wheel tractor trailer (significantly larger than a shipping container). But much bigger than that you start getting into "how do I move it to the site" issues, which means costs due to transport are going to go up fast, and you're back to "does it just make sense to build a fixed DC", perhaps with a careful eye towards "I'll want to easily tack on more capacity later". Even if you figure out a way to do off-site pre-fab economically, I don't see how it would make sense to do "DC built out of X many identical prefab units" but instead you'd want to do "X many rack units, and Y many network units, and Z many air handling units, and W power distribution units, and V many CnC units, and...". I know there's a lot of talk about how building houses out of prefab components is going to change the world (one day), but unless you are building a lot of data centers, I don't know how you build out the infrastructure to deliver on that that's going to be cheaper than "haul materials to the site and build it there like we've done forever". My completely unsubstantiated view is the volume isn't there.