LEO is still absurdly empty in absolute terms. Even with a million or so objects, the density is still far below “parts per million” (more like parts per billion).
And most importantly we track almost everything to provide a launch window and trajectory before a launch (I worked at NORAD and Space Command for many years).
Yes, the LEO band is getting crowded, but it’s not like the 405 on a work afternoon at 5 pm. It’s still very much a rural highway.
I like the idea of companies cleaning up LEO, we need to start doing that anyways, and I believe we will. Elon is not going to just let his stuff get mashed up in a collision.
Sometimes the atmosphere can expand in scores of miles. This is referred to as atmospheric drag. Atmospheric drag can sometimes be our friendly janitor! It pulls the debris down to burnup like a shooting star. This is especially true for the LEO band.