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If your gameplay is "instanced" or separated from the community by "phasing", you might as well be playing offline. And if you are with a group, then okay, the group might as well be playing offline, maybe at a LAN party at someone's house.
MMO's are about many players sharing a world, and not meant to be about isolated segregated experiences. The player who brags about having spent 10,000 gold on his instanced housing makes no more sense than someone bragging that they have an offline castle. If you cannot see it, it does not exist (in the gameworld). The player who goes into and comes out from an instanced dungeon, might as well have been logged off the whole time, as far as the community knows or cares. The player who "phases" into some solo quest against an 80 Elite mob and uses some gimme item that is part of the quest chain and which zaps the creature into a non-elite mob that is easily defeated, has no more bragging rights than if he had been offline.
If it didn't happen in the greater shared gameworld, it didn't happen.
"Instancing", "phasing", "linear story quests" and such all serve to isolate the player from the community and reduce the call load of customer service, since minimized player contact equates with minimized number of player complaints. And I really think these "instancing" game design methods are more about the latter. The whole "instancing" movement is really equivalent to sedating an entire psychiatric ward so the patients will all shut up and go to sleep.
"Instancing" and its forms have no place in great MMO's. PERIOD.