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I'm thinking here of instances with a variable cap.
Cities would have no cap obviously, so all the people in them can actually interract with one another.
Areas close to cities would have a pretty high cap, say 100 so it's pretty lively but never crowded as hell.
Really remote areas in the middle of nowhere in a hostile environment would have a cap as slow as the maximum number of people in a party is with some flexibility, so if the max party size is 5 and the area cap is 5 the party could still enter if the number of player in the instance was 4, the absolute cap would be then 9, so it's possible for everybody to meet at least one other soul in an area.
Obviously you would share instances with people you don't know, unlike say, the original Guild Wars.
I really think it would help with immersion, and as far as I know it's possible to create instances without loading screens (SWTOR did it IIRC) so you wouldn't even have to deal with tons of loading screens.
Thoughts? I think this idea is never going to make it in any mmo ever (unless I get rich and decide to make one) but hey.