Duroon, you are absolutely correct; I've operated a number of digital presses in print operations and been responsible for designing to accomodate them.
The paper we buy in reams at the local Staples/OfficeMax/Taget/WalMart store is cut that way as a standard size for consumption, but that's not how true printing establishments usually buy it.
The printing establishment by and large order parent sheets that are 34" x 22" and sometimes larger and are then trimmed to various sizes to anticipate customer print jobs. One of the most common sizes in a large print operation (that is not a web press) is 9"x12" cut to this spec for the purposes of trim edge versus bleed edge, but it is a more expensive proposition because ultimately it creates paper waste.
The reason FedEx/Kinkos cannot print an 8.5x11 sheet is due to the gripper edge and side margins needed to ensure that the press itself doesn't run off the edge of the page and for the paper to be able to be grabbed, pulled and fed through the print apparatus.
The recommendation of tabloid/11x17 is because they do not order parent sheets of paper and then pass that inconvenience of only making standard sizes available to you while upcharging you for the extra paper and waste and charging you for the trim down....
Trimming to bleed edges sometimes makes a product pretty, but not always, and no printer has ever been designed that printed a true full bleed to an edge.
Some presses print to a larger sheet like a parent sheet or roll feed and then fold and trim in a bindery operation after the ink is given time to set. Entire machines that fold and fold again until 16 page sections are then bound together after being inserted into one another and saddle stiched or placed in succession and perfect bound or trimmed and punched for a comb binding....
8x10 is (whether it works for my eyes or not
) a better business decision in the long run keeping costs down to bring you more product.