I think we have to adjust our mindsets when we find ourselves thinking of large royal palaces as private residences for monarchs. They were far more, serving a multiplicity of purposes: venues for state receptions, working and meeting spaces for daily management of government affairs, staff offices, school rooms, the residences of those attached to the court.
When Louis XIV turned his father's hunting lodge into the palace of Versailles, estimates are that it eventually became the home and workplace of close to 10,000 people. There are probably vast expanses of the palace in which Louis XIV and his successors never set foot. Usually the monarchs who lived in these great palaces actually lived (i. e., conducted their private lives) in apartments within the much larger buildings. Perhaps Louis XIV, by placing his bedroom in the center of the palace overlooking the Cour de Honneur and by conducting his rising and bedding ceremonies as state events, came as close to living in the main rooms of a palace as any post-medieval monarch.
If the Alexander Palace is deemed small, that is only by Russian standards. Its square footage exceeds that of Buckingham Palace. But Nicholas and his family used relatively little of its floor space for their own private purposes, choosing a wing of the palace that its original designer thought of mainly as overflow space. The wing they renovated into their personal home certainly was never intended to house the monarch, placed as it was closest to the street and, at least in the original layout, cut off from the palace's main rooms by the concert hall. Also, the only rooms that accorded any privacy in that wing of the palace (by looking away from the entry courts) had a southwestern exposure which, in the era before air conditioning, was exactly where an architect would not have placed primary living spaces in a summer residence.
Many people do not realize that the family spent large amounts of time at the New Palace that Nicholas built at Peterhof, even when the court calendar showed him in official residence at the Alexander Palace. The New Palace looks far more like the home of a prosperous industrialist of that era than a royal palace. And everything about the New Palace and the private wing of the Alexander Palace -- their layouts, their decor, the store-bought furniture, the domestic clutter, the shared bedrooms -- indicate a deep craving on the part of Nicholas and Alexandra for domesticity. In many ways, I think the New Palace was Nicholas and Alexandra's equivalent of George V's York Cottage.
I'm not so sure that it was the royal sisters Alexandra and Marie who instilled this sense of domesticity in their sons. Marie Feodorovna loved pomp, elegant society, and stately surroundings. It was at the insistence of her husband that she raised her family largely in the garret rooms of Gatchina, where the quasi-military tastes for simple food, camp beds, and cozy chambers could more readily be instilled in the children against a suitable physical backdrop.
Of the Romanov-era Russian rulers, I think the only ones who really had a taste for pomp and splendor in private life were Elizabeth, Catherine II, and Alexander I. When one really catalogs the structures erected or chosen as venues for private life by the others, one finds a long list of cottages, retreats, private kitchens and gardens (Nicholas I cooked many of his own meals in a basement at the Alexander Palace and did much of the spring and summer gardening himself).
I think the closest a modern thinker can get to understanding how monarchs viewed their palaces is to think of how a CEO of a large corporation today views his corporate headquarters: a showcase for the company's power and prestige, a workspace for his extended staff, a venue for board meetings and corporate events, a place where he keeps an apartment or a grounds house for convenience and easy access to corporate services . . . and a place where, like it or not, he has to spend an enormous amount of his time to maintain his grip on power.
