I think the most challenging aspect of MMORPGS is balancing it enough so that hard core players are challenged, while casual players are not so discouraged that they stop paying. I played MUDs in the 80s, and the ones I played (MUME, for example) had much more challenging gameplay, including permadeath. Trolls would permadie if they got caught out in sunlight, turning into a statue. This was a great concept. Trolls could smash with almost no equipment and I would often spend a night running to Bree to whack on unsuspecting "whities" for shi-s and gi-s. Great stuff!

Also, if you died, your corpse contained all of your eq and could be looted by anyone. Imagine that in WoW! epicced-out toon dies, has to re-equip all over again! This aspect is really what's missing in my opinion. It was easier to do with MUDs because they were free, and everyone that played was pretty much "hardcore".

I haven't seen anything before or since with the depth and challenge of MUME! I would love to see a MMORPG made of it. The coders who wrote the zones often mudlled custom events related to areas too, like Tom Bombadil's forest, the Rivendell Ford, etc..