I ended up doing more troubleshooting with Berra and her team about this and wanted to report back. It looks like the issue they were running into is that when using a fixed repeat count, repeat instances are never removed even if the repeat count is changed to a smaller number. More in this issue.
The suggested approach for handling this case is to put a group inside the repeat with a relevance condition and is documented here. This makes it so that if the repeat count decreases, the extra repeat instances are hidden but not deleted. If the user then increases the count again, the extra repeat instances reappear.
I'm not so convinced that this behavior is helping reduce data loss and I do think it leads to confusion. Eventually I'd like to revisit some possible improvements we could make. In the mean time, @Berra_Ari's form appears to be functioning as expected with the inner groups.