Thanks for questioning this @erikjohnston. After thinking about this more and asking in #matrix-spec, it indeed seems that there are no valid use cases for needing to specify a remote user in an application service's user namespace. By specifying local users, you will receive room events/presence updates from remote users anyhow.

As @Half-Shot put it, defining remote users is merely a footgun for which an Application Service may assume that it'll receive all events sent by that user, even though it will only receive events in rooms that are shared with a local user.

So by that logic, I'm fine with us defining (and limiting in the code) user namespaces to only cover local users. It would make sense to update the spec to include the same. Sorry for the run-around!

-- @anoadragon453, matrix-org/synapse#14000

This behavior has been updated in Synapse via matrix-org/synapse#13958