I don't think it's about the term, "server" and "instance" both make sense to me. The issue is that the fediverse itself is pretty confusing.
The basics? Great: it's vaguely "IRC but persistent", all good.
But for starters it's hard to keep track of which instances actually exist - new ones pop up and old ones die at the drop of a hat.
Then there's differences in feature sets (lemmy vs kbin and whatever else) that happen to be ActivityPub compliant or whatever. kbin notably doesn't federate downvotes, for example. And all this software is still relatively immature.
Then there's the actual "who federates/defederates whom and why" debacle. This results in a lot of obvious and some less obvious visibility issues.
Then there's (other) individual instance politics.
Then there's the "meta" about all of this, which is getting confusing.
A couple of these will have parallels on e.g. Reddit - I assume this is the natural comparison to make and will keep being so for a while - like sub drama and the relationship between subs. But because the FV has this at the instance level, (and each instance has many "subs",) it's a whole level up in complexity.
Then there's how all of this makes for a pretty un-reddit-like experience - and Reddit is not the king of polish, either. While Reddit has duplicate subs, it doesn't have a design that almost automatically causes them to be created and distributed, across instances without actually correlating them afterwards. The end result is that subbing or blocking any one community will likely involve doing that manually on several instances, which is stupidly inconvenient. Also discoverability is much trickier which is worsened by the low activity.
My point is: call it what you want, but a) I don't think that's where the confusion is coming from - that's just the fediverse being confusing (and outright clunky in many regards), and b) obligatory XKCD "Standards".