Neverwinter Nights (2002) had an active modding community, and it was used as the basis for many "persistent worlds" -- much like MUDs, or miniature MMOs, these could host a few dozen players and DMs at a time. The community around a good persistent world would be small enough that the regulars could get to know each other, but large enough that there were always some people around you hadn't played with before. DMs could effectively plan events and the like that suited the actual players, and respond to player actions.
It wasn't perfect, of course; the demands on those running the persistent worlds was quite high, and NWN hadn't been designed with this application in mind. But my best roleplaying experiences were on NWN persistent world servers.
So yes, this is an achievable design goal. And I've really wanted to see a game designed from the beginning for this model of play, with reasonably modern graphics, user interfaces, admin tools, and map development kits. Somewhere I've got notes on the sort of game I'd develop if I won the lottery, and there were a lot of similarities with this description of Shards Online.