Not everywhere, no. I've been looking and haven't seen that type of widespread rebroadcasting. I think this is just between some small sets of relays, and only with some users perhaps? Otherwise Nostr would definitely not work at all.

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Agree, not everywhere.. but to the most common relays so that at least one of your common relays will have a given event.

Why would it not work/be a problem?

If it’s an overload/DoS issue, can’t a node just not rebroadcast if they already have the event registered?