We do know that Athas isn’t completely absent of metals. It’s just not that common. Tyr does have an iron mine.and book talk about the use and work of it being lost.
In the Wanderer’s Journal, page 9, from the original boxed, set he talks about metals being rare, but he also surmises that it hadn’t always been that way.
“As I have stated earlier, it is my belief that metal was not always scarce on Athas. For the last few centuries, our main source has been debris from the ruins of ancient castles and cities. Apparently, our ancestors devoured Athas’ ore supply, leaving to us little but their scrap. Now, even that meager supply is all but exhausted, and with it fades the ghost of civilization. There are those who say that our cultures and technologies can survive without metal, but I believe that they are wrong.”
Perhaps the depletion is localized. It’s also possible that the location of the city-states are just not in a metal rich location close to the surface. Somewhere in another thread or discussion there were estimates that the campaign setting takes place in an area about the size of Colorado. If that is the case it’s reasonable that other areas on the planet may have iron deposits. Or it at least suggests the planet has an iron core like Earth and gravity can still be the same.
For monster size, I think it’s reasonable to look at Earth’s past environmental conditions. Compare these to dinosaurs and their size for terrestrial creatures and also look at ocean creature size like whales for silt dwelling creatures.
I’m not sure that an increased amount of oxygen on a planet would have changes to gameplay rules that lowering the gravity would. (A can of worms in my opinion)
I too am not a fan of relying on magic compensate for the laws of physics. I like having a solid foundation we are all familiar with, that can be relied on, and described by physics and then magic and Psionics breaks those rules in ways physics can’t describe.