I'd argue the min MN chain should be at least 4 long.
Assuming (with medium paranoia settings) that the "bad guy" has a handle on 10%-20% of MN's (100-250 nodes), then with a 2 MN chain length the above numbers predict between a 1%-4% chance of a de-anonymization. This is far too high IMO.
There should be no option to select rounds... it should be 8 minimum with those that want added mixing to go above that. With no fees per round, it makes sense not to have less anon'd coins (those in which the user chooses less than 8 rounds).
What are the drawbacks (if any) of increasing the number of rounds from a default of 2 to 8?
EDIT: I guess it'll take longer but will this be mitigated by InstantTX? For that matter will DarkSend and InstantTX be compatible/interoperable (used simultaneously)
Two totally distinct concepts. Darksend rounds will always take the time they will take. You can't InstantX rounds. But once your coins have been anonymised, the yes, you're free to InstantX them at will. InstantX Darksend or InstantX regular. At least, this is preliminary testnet findings.
The more the rounds, the deeper the anonymity. 2 rounds is already crazy good, 8 is like ultra-mode.