I think it may be possible to get some activity on the outside, public areas which is actually entertaining and meaningful. The first thing that has to happen, though, is the world needs to be BIG. I am talking about sprawling areas with many places to explore... and every hundred meters or two there doesn't have to be some permanent landmark used in a fetch quest. And certainly the next town isn't a 5 minute walk away. So this would give us lots of potential for scenery and other minor landmarks, special areas where certain creatures may spawn over a large range, and the sense of being immersed or even lost... but it also would thin out player population except in the cities or traveling routes.
Now the reason I'd want to make the world so big isn't so we can play the MMO like a single-player game. Rather, it is to allow monsters and various quest objectives to spawn while no player is even near them. See, the typical MMO style where we have some random bears that we have to collect bear asses from which spawn infinitely in a somewhat small area and patrol the same 4' x 4' square is pretty lame and boring. You end up just camping the same spot and wait for them to respawn. And then even the fights are not particularly interesting. By contrast, what I am looking for is a way in which creatures or items respawn which is not so monotonous. I mean, they DO have to respawn, otherwise the world would be cleaned out in no time.
When we increase the size of the world, we need to do some things... since, for example, the bears you may be asked to hunt may be few and far between, the quest has to require less done. Say, instead of getting 20 bear asses, maybe just 2 or 3. Then, you need to throw in MORE random things which may be interesting finds or hostile creatures which, let's say they're randomly spawned too, but they're just there because they are. Lastly, the fight with the target creature, such as the bears, would have to be much more intense, and the reward for going through all this needs to be appropriate.
Ok, so here's an example. You come to a homestead near the outskirts of a town and talk with a farmer. He says that last night a huge bear broke down his fence and killed a goat. He managed to shoot the bear, but he did not kill it. It had ran off somewhere, and many cows ran out as well. So what he wants you to do is track down that bear and finish it off, as well as bring any cows back.
So you go running off into the woods. There is a trail of blood which is rather easy to spot for a while. But then it gets harder to follow. You wind your way around the trees and find one cow. You can either... take it with you, which would probably slow you down; tie it up somewhere so it will stay in one spot; or take it back to the farmer immediately. This isn't an "all or nothing" thing, so you just get some amount of money/exp per cow. So then you keep going, and -- oh snap -- you just walked right into a web... and there is a very hungry monstrous spider waiting. You fight that off, kill the bugger, but it poisoned you. Loot anything from it you want like chop off its leg or pincher or silk spinner. Maybe search for some other thing it caught and find an adventurer's pack.
Now this doesn't necessarily have to be a "generic poison", and hopefully you have some antidote for it. If not, you can go back.. or maybe try and tough it out and keep going. I dunno, are you still strong enough to take on a bear? Well it was injured. So you keep trying to track the bear, and you actually cross a road. You see a merchant walking along it, and he happens to have a particular spider antidote on him (hopefully for the right kind of spider).
Then, did you bring your cow with you? Maybe he wants to actually buy it from you. You know, the cow that isn't really yours. So now you keep tracking the bear, and lets say you find one of those plants you can pick for some herbs or a mineral vein. >.> Ok, that's pretty lame like WoW. Maybe just a rock exposed from erosion which looks like it may be valuable.
Then you find the bear.. it's sleeping and seems to stink awfully. You sneak up on it about to kill it and realize its already dead, and its insides have been cleaned out by something. Then you hear something behind you and it's the giant space flea of doom! ...Or just a few wolves which had hidden when you first arrived. Now I suppose you could back away slowly and they'd stick with eating the bear. Or maybe you could fight them and maybe run a survivor off. Either way, you take a more direct route back to the farm, find another cow, spring a tripwire, and almost become a troll's lunch. Wow, that was probably not so simple as any other side quest, was it?
And the thing is, all these extra encounters were all randomly generated... either they were already present in the game world or they were created due to this quest. If we have a huge world with tons of seemingly simple quests like this, plus bounties for killing stuff, many random things to discover, very dangerous monsters, intelligent bandits, etc etc ... I think it may do alright.