Well, you already know my opinion, but in case anyone else doesn't, I guess I'll say it again:
Over the course of today I have become somewhat interested in the idea of modelling for this. I use 3DS Max, and can't quite get myself to work on my demo reel 'cause I've got no motivation, but a project like this could be just what I need, if I can find the time to work on it.
I've used the Crystal Space engine on Planeshift before, and I think that if we get a few good coders in on this we could get something quite impressive done. The engine supports fairly high quality graphics, and it seems that it supports a fair amount of physics as well. It was a little slow at first, but I've seen the netcode improve, so it can be done if it doesn't come default with the engine.
I'm thinking that we should start with making it like a 3D chatroom of sorts, where people can just wander around represented by a 3D character, or avatar... maybe if we can get that working well and people show some interest in it, we could expand it to include some roleplaying elements, and world interactivity... though that would again require some serious coding.
What we'd need to start with would be just the basic engine... we'd need to figure out how it works, and how to do the basics of what we want and expand from there, I think. It'd probably be best to just start with the castle courtyard area, and expand outwards, and inwards once we can get it working half decently.
The project, once it gets past the "we're trying to get the engine to work at all above all else" stage will need a number of people working on it. We'll need someone to do concept sketches, blueprints, textures, I could probably use a hand with modelling, we could definitely use more coders, and once we get the world set up we can get into character design.
I'm not sure which would be easier though: individual character models for each person, or a character creation system which you could use to customize the look of your character, plus clothes and stuff that could be changed to really add to the customization. The former would require a lot more work on the modelers end and would help add to the individuality of everyone, while the latter would require a lot more work on the programmers end but make it a lot easier for someone new to get into it, in case the modelers aren't around to create a custom character.
Again with the thinking big. =P
I'd say we could probably put MC in charge to some effect, since it was her idea in the first place...
And anything I've left out I'll come back and put in later when I think about it.
I'd really like to work on this project... I just hope there's enough interest to justify it.

Inflammatory signatures hurt us all...