"Communities" would work well because most people understand that it describes a group of people with similar interests which is basically what Lemmy instances are (whereas "instance" sounds borderline meaningless to most people as if you're trying to push them onto a tech project they don't understand). The Lemmy "c/" could be called "subcommunities" or "sublemmies" or something like that which would help people who are familiar with Reddit understand what they are as well.