It seems like religious-zionism narrows the kingdom of G-d down to one small plot of land, while in reality, He fills the universe!

Shalom. Your question isn’t on religious Zionism but on Judaism and the Bible itself, and not just regarding the Holy Land. You can similarly ask, if all of life is meant to be holy, why does G-d grant the Shabbat (Sabbath) special holiness? If all people are meant to be holy why is Israel the Chosen, and within Israel, why are the Kohanim (priests) blessed with an additional holiness? Just as every generation needs leaders and teachers to set an example and influence the others, similarly G-d chose to concentrate Himself more, as if it were, in one day, one people, and one land more than others, and that “concentrate” is meant to set an example, set the tone and influence the others. So “G-d chose Zion, He desired it for His habitation, This is My resting place forever, here will I dwell for I have desired it” (Tehilim 132, 13-14), “For G-d has chosen Ya’akov for Himself, Israel for his special/treasured possession” (ibid 135, 4). That’s why the mitzvot were commanded to be done by Israel in Israel (Dvarim 6, 1; Sifre Ekev 43). Just as when a gentile lays tefillin (phylacteries) or eats matzah on Passover, it’s not the same as when a Jew does the same action, so too, the Chafetz Chaim says that the same mitzvah when done in Israel is worth 20 times (!) more than if done abroad (L’Ntivot Yisrael, p.202). Similarly, there is only prophecy in the Land of Israel or for her sake. With Love of Israel, Rav Ari Shvat