I'm not sure exactly what the difference is between a text based MMO and a MUD.. but I have played MUDs, and they can evoke very real feelings if developed properly.
To date, I have never played a graphical MMO in which combat felt as real as it did in a MUD named DragonRealms. There were many contributing factors. Your strength, agility, reflex, stamina, intelligence, wisdom, discipline and stamina were compared against those of the creature or enemy you were fighting. How many were there, could they use magic, and if so, it was compared against yours, provided you were a magic user.
You could 'assess' your enemy, and determine whether you had a fighting chance against them. If overmatched, you could retreat, but that did not mean you would always be successful. Sometimes you would fall while attempting to retreat, but the enemy kept advancing from ranged, to polearm, and then finally to melee distance. Combat ranges, as weapon swings, are measured in roundtime. It may take an enemy a total of ten seconds to get to melee with you, and if you fell while trying to retreat, you suffered a roundtime for falling, as well as one for a failed attempt at standing. This meant that while you're trying to stand and retreat, the enemy is closing on you, with 'Combat Messaging' fueling your anxiety.
Now, you're probably thinking.. what's the big deal.. you die.. and then run back to your body. But what if you lost all your experience, and perhaps all the items you were carrying and wearing, unless you were raised by a Cleric? Then it wouldn't be quite so easy, especially if you were hunting in a remote area where there are not many adventurers to help. Combine that with the inability to speak while you're dead, so you can't even scream for help.
Let's also assume that while you're trying to retreat from certain death.. a pesky thief in the shadows decides to take advantage of the situation, and starts picking your pockets of all the hard earned gold coins that you have collected. Now, you're engaged with an enemy you can't defeat; have enough perception to see a thief picking your pockets but can't do anything about it, and if you die the thief may grave rob you.
I know it sounds silly, but when you're in the heat of the moment, and focused solely on not trying to die, the combat can feel very real. And death does have consequences. This game I'm describing began in 1996 (I believe), and it's premium and platinum memberships are much more than any graphical game on the market.
Basic is $14.95 per month
Premium is $39.95 per month
And I'm not sure on Platinum.. I think around $50
Distance in this game is equated with time. There is travel across deserts, and even oceans. At one point, it took almost 2 hours in real life to go from the mainland to one of the farthest islands. There was messaging every so often to give the sense of travel. Things like seeing the shore grow smaller and smaller until you are surrounded by nothing but water. Or the captain shouts out an order to change direction. Perhaps you'd even be attacked by Pirates in certain areas of the ocean. All this gave a sense of travel and being on a ship. Even the ship had different decks like a real ship. You could fish.. and even gamble in the casino while you traveled.
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Below is an example of the writing in the game.
You hear a strange whirring noise.
An odd sort of shuffling noise comes from the backpack. Suddenly a ironwood doll climbs out of it, crawling in a grotesque spider-like fashion with its limbs all splayed out and its head twisted upside-down, dropping to the ground and crouching on all fours. Its limbs writhe about briefly and then it turns its head to look straight at you, carrying the same blank smile it always has. However, you quickly notice its eyes are suddenly filled with an eerie sort of intelligence.
You feel briefly frozen in shock!
Letting out a tinny sort of laughter, the ironwood doll pounces at you with a murderous expression on its face! Realizing too late that you're already somewhat off-balance, you fall to your back with a *thud* from the surprise. Drawing a rusty vegetable knife from underneath its clothing, the doll mercilessly hacks at your limbs with surgical precision, not stopping until all four are severed!
You are stunned!
Giggling more, the ironwood doll then drags your limbs off behind it, quickly disappearing from sight and leaving your broken body behind.
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There are many ways to accomplish what you're thinking about doing. I'd suggest checking out some MUDs and compare how each handles it. i'll give you a couple links to help get you started.
https://www.play.net/dr/
http://www.topmudsites.com/forums/