As mentioned earlier in this thread by Dthen, I would urge the Original Poster (and anyone interested), to try out Haven and Hearth.
The game is developed by two swedish students on their spare time, is still in alpha, but in a highly playable state.
The game has almost complete character permadeath, though some skills (typically around 25% of actual skill values) can be inherited by the offspring of the deceased character. The game obviously come with alot of community drama and personal trauma at loosing a developed character (PvP crimes like theft and murder can be carried out anywhere and anytime). The harsh effect of getting a character killed is to some degree mildened by the way the game makes players invest into settlement or community infrastructure instead of pure levelling of character.
The game setting is inspired by early Germanic and Slavonic life and mythology, in a very low-fantasy way.
I realize that this post, combined with my low post count, sounds like a right-out advertizement.
In a way it is, because I think this game deserves every piece of attention it can get (not from the gnorant masses, but from people asking questions about where MMO can and should head, like in this thread.)
However, I made this post because the game tries to give an answer to quite alot of the points raised here:
-Infrastructure building instead of character building
-How to make casual play possible, while still having no cap on skills/stats
-Player created economy and justice (No NPCs except incredible low AI animals
-Single high level character vs. army of alts
The game sure has its problems, one of which is an endgame that relies on the players themselves creating drama (or politics
Fell free to PM me if you have questions or problems.