I think the only way to handle a non-instanced world for a modern MMO is to have an insanely huge, non-sequential environment that's too big for any one person to ever fully explore or even think about. I think it's also important to keep transportation slow--no high speed vehicles, no teleportation.
Instances seem like the easy way out because the right way to do it takes a lot of designers for a long time and no one likes to make that kind of investment.
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