The benefit here is that there would be no network latency and subsequently no network traffic.
This is slightly incorrect, there would definitely be some network latency since within clusters we have separate machines connected by LAN, although the intra cluster latency would be very less compared to inter cluster latency.
I don't get how less network traffic is helping for scalability?
Consider the scenario where a client requests for a file not available at the cluster, so the cluster then fetches the file from its location via the network.
If such requests increase in number, the inter cluster network traffic increases, and the respective clients are waiting till the file is fetched and served. So your throughput(no. of clients served per unit time) would drop as compared to when the file is cached at the clusters in which case, there would be less network traffic. This would mean you are able to scale to more users when the file is cached(low network traffic) as compared to when it is not cached(higher network traffic).
Of course both the scenarios occur together, the initial requests aren't cached so the throughput is low, which increases as more requests are cached and users request for them (no. of users > no. of files)
How many users are using the network doesn't affect the response time for the client.
This holds only up to a certain limit, if the rate of incoming requests is >>> rate at which they are served, then its easy to see the bottleneck.
How many users are using the network doesn't affect the response time for the client.
This is considering that the architecture within the cluster can efficiently serve the requests irrespective of the number of nodes, it sort of gives an upper bound of time taken to serve a request that is cached. A request would arrive at one of the nodes. Assume a simple ring architecture, then in order to find which node has the copy of the requested file, the upper bound would be given by querying all nodes in the ring. As the number of nodes increase, this upper bound would increase, but it wouldn't effect the client as it is unaware of the internals of the DFS.