This and all those families took up the room that could have been used for better systems of any kind from weapons, shields, sensors, science labs.
The fact of the matter is that a flag ships needs to be able to deal a few good solid punches to at times. At this the Galaxy class just doesn't hold a candle to the sovereign which was designed from the ground up to be far more combat orientated and than you can take even half the mass of the galaxy and come out with a batter ship with only 1 down side, it does not carry families and really families should not be onboard most vessels.
The Galaxy wasn't created during a time with major war though. Although the Dominion War refits of the Galaxy did infact use that space for better systems.
The Galaxy's "Kill to Death" ratio was the highest of any ship during the Dominion war.