I see you have have thought about these things which is good. The reason I say this sort of design limits leveling is because you dont what the player to invest too much into their avatar that they dont want to use a new character. For instance starting with level 1 again will mean fighting those early level creatures. Of course you could remedy this by adjusting the players start level when they continue with the new character, but you may have problems if you go the traditional rpg level up route. You may wish to use more of a skill based system instead, that was what I was trying to get at, but failed to think of those words at the time. Alos players get attached to their avatars because they pretend to be their character in this magical world. They are the hero destroying the bad guy and saving the world. They have a much easier time associating with the humanoid avatar they control compared to a world that is a place they visit.

After playing Pirates!, I realize that perhaps your ideas are not that far fetched for the simulations. Earlier I had only read a few reviews on the game, but had not played it. I keep forgetting how easily a player can be fooled, and how they have no way of knowing how the events unfoled exactly. Sometimes I forget just how much we as players will fill in the blanks with our imagination o make things work. That game has sort of a continue+ system where when you dock you get the option of splitting the gold and starting over keeping your items, some of the gold, your main ship, part of the crew, and reputation, titles you hold, and a few other things. The world is also fast forwarded by a few months to simulate you taking a break from being a pirate. During this time the gameworld gets simulated. If your game has little story, the simulation that you run could be similar to what is run when the player plays, except sped up. To clarify by "little story", I mean you have few scripted dialouges and events that would break the illusion of a smooth transition that the simulation could provide. You can very wel have a great back story which drives all the events that may happen during teh course of gameplay.

Breaking things up by scale (ie world, country, state, provice, individuals, etc) seems smart. Though i feel that the game still could not be like a rpg only because you could not have a decent story. Then again with enough good random events it the player could fill in the blanks like playing sims or pirates!. I however do think that creating scenarios for the player randomly will be troublesome. Pirates! has very repetive gameplay and its very simplistic in nature. Though it still was a bit fun because you wanted to be the best pirate, and explore the world (to some extent). I think that coming up with a decent system that can create fresh scenarios that dont all feel the same will be the toughest part. Random dungeons may help this, also games like D&D might be a good influence. Scenarios need catagories and developed in a way that becomes fill in the blanks. ie nationA needs itemB from nationC. That can yield plenty of quests depending on number of warring nations and items of value. As a bonus you get the Protect the itemB for nationC or Get the itemB for nationA. This dual mission can help give the player choice in the factions he wants to deal with.

I keep forgetting how slow sometimes professional companies are to test new ideas even in the pc game world. Though after playing Pirates! it seems very similar to what you are suggesting. Though you definatly seem to want something a bit more robust in which the world changes more then a few cities be taken over by other countries, or is it? I tend to play devils advocate a lot since many people come up with ideas without thinking them through and forget some little details that can impact the overall effect of the idea.

I think i was a bit vervose, hopefully something in there is interesting. I definatly think that a game like this would be possible, its just a matter of whether the gameplay could be kept fresh with each new character. This is where I have my doubts in how robust the simulation can be. I guess that would really depend on the type of game it is.