You need a relay unless you want to have all the same NxM scaling problems as Mastodon.

Not really, considering there aren't that many app servers. Each PDS sends out its events, those events are picked up by whoever wants them, mostly relays but some apps might directly subscribe. The more apps in play, the more connections, but it is not the case that for every new PDS, every other PDS now has to open an additional connection. It scales with the amounts of apps, not PDSs.