Supposedly there is a 32 player limit in each instance.
There isn't. Frontier, when asked way back in the Kickstarter days (about a year pre-release!) how big an instance could get, threw out that number as an approximation and perhaps an aspiration. Since then the instancing code has been repeatedly rewritten (mostly for the better) but the number has stuck around as A Definite Fact regardless.
The record number of player ships in a single instance is just over 100 - I've personally been in one just over 80.
However, you need to do a few things to get them that big:
1) No NPCs around. Once you start having to send NPC data between players as well, it seriously gets in the way. I've not seen instances over about 10 players in inhabited systems very often, and they were very flaky, even when using wings to build them. (I think the best we managed was about 15 players, and the NPCs didn't like that)
2) Being in a wing massively prioritises "same instance". Even in uninhabited systems with everyone having excellent networking, just showing up at the same spot might get you up to 20 players together. Beyond that, you really need to systematically use (temporary) wings to bring extra people in. I don't know what the limit is on that: generally you can run out of players before hitting it in uninhabited space.
In a supercruise situation where there's several people around to start with, neither of those are very likely to be the case, so the instances tend to end up high single-figures, though I've seen low double-figures in uninhabited systems.
(Having been in super-large instances, the game engine starts to seriously suffer in terms of frame rates above about 50 players. You need to fly pretty cautiously to avoid accidentally ramming each other before you noticed they were there, and people rubberband about quite a bit)