I am one of those guys that waxes poetic about the good ol' days when of pre-Trammel UO. When MMO players were men! (j/k). I think one thing that people have been missing when talking about the viability of losing your gear and getting griefed is that UO had a couple mechanisms to deal with that. I thought they worked fairly well.
1.) Nothing you owned was worth that much. If you were a melee fighter (say, a dexer) you'd have some GM ringmail, some GM chainmail, a GM kyrss, and a handful of potions. If you lost all your gear, so what, it was only a drop in the bucket and you probably had 5 more sets in the bank. UO made losing all your equipment ok because none of it was "Ringo's Flaming Axe of Death and Retribution" that took 97 hours to get. There were good magic items (vanquisher weapons) but they were rare, and you could lose them. This made them all the more revered and as such, they were only used in special situations and by those who were confident in their abilities.
2.) PKs were flagged red. If you wanted to PK people heavily you could, but you'd go red, everyone would know it, and you couldn't go into town. This was a big enough deal that the average person wouldn't go around slaughtering newbies for fun, but those who wanted to be PKs could. In my opinion, this allowed for an excellent balance of "good guys" and "bad guys."
3.) There was no level system or con system. Since you couldn't look at a person and see they were "10 levels above you" or they were "grey" and you couldnt tell from their gear because the biggest newb in the game and the best player in the game used approximately the same equipment you had to be weary of people. It meant you couldn't go around griefing people without a high percentage chance that you would get killed yourself. I think this also added to the fun of the game because there was a sense of the unknown when you left the confines of the town. It was wise to grab a couple friends and take advantage of "safety in numbers."
In conclusion, I think the newer MMO's can't support the (imo great) rule set of UO because they focus too much on levels, and loot. UO focused on interaction. There were no classes, no discrete levels, and the equipment was more "realistic."
Sean