Lol @ Dustin, I almost didn't post that screenshot because the Imp killed Zack, and I wanted a clean screenshot, but then I thought to myself... What a noob! So I posted it!
Okay, to your questions: There's going to be plenty of questing, killing, gathering items, escorting friendlies, gaining XP and turning in quests to level up. I plan to include an intricate crafting system, so you can make your own epic stuff but I haven't decided on the exact system yet and it's still too soon to do so. Rest assured, crafting is on the table, and it'll include cooking, weaponsmithing, armorcrafting, magical item enchantment, some kind of device/gadget engineering, and anything else I can come up with - I love crafting in RPG's, so I can promise you a rich crafting system.
The game world is potentially massive. The test area outside the house ("Shadaah Forest") is about one quarter the size (in each dimension) of the largest zone I want to allow for, though even larger zones might be possible with some refining. That might not seem like a large space, but by linking zones together in the same way "West Cape" is joined to "Shadaah Forest", zones can be made as big as they need to be. The engine is ready, right now, for five thousand zones - which to me is an incredible number - and I see no reason why I cannot arbitrarily increase that number to fifty thousand. It is plenty big enough
Now, as to players affecting the world around them: I *really* want to include a kind of "home base" for players. I don't know yet if it's technically possible in my engine, but when the time comes I will think the sh!t out of this one because I've never seen it in another RPG and I want it badly in mine. Over the course of the game you will earn yourself a plot of land from the King, or be left some land in a deceased relative's estate, or something similar. It'll be a patch of forest, with trees, grass, water, you know, the usual outdoorsey forestey stuff. In this area that you own, and only here, you can use workman's tools like a woodsman's axe, a mason's pick, a carpenter's saw, to cut down trees, mine stone, refine wood, and generally gather the materials in your patch of land (which I envision to be quite large, on the order of a small village in size). As you work, the landscape will be cleared away, leaving you with flat, open terrain. By the time you've gathered materials you'll have a reasonably sized clearing in which to start work.
You will use the materials you've harvested and refined to build structures, in any way you want. I am throwing a few plans around, such as allowing the player "use" a piece of wood to change a tile from grass to wooden floor, or to use a stone slab to change a tile to a stone wall, etc, so that you can literally construct a building tile by tile, entirely by hand, using the materials you've gathered. Harvest a piece of stone, and you can make a few sections of stone wall. Cut down a tree, and you can place a 9x9 section of wooden flooring, etc.
The idea is that you construct your own house on your own land and fill it with whatever you want. A place to stash your loot, and perhaps to conduct business.
These "home" zones will be invadable by other players, who can take all your stuff! And so, you will need to spend gold to hire NPC guards that will kill any thieves on your property and put your stuff back. Anyone who doesn't steal is welcome to explore, and you can hire NPC merchants as well to conduct trade, or hire an NPC carpenter to mill all your chopped wood, or a mason to turn your stone into construction slabs, etc.
I envision this home territory to be initially as a home for players, but as you gain wealth and status in the game, you can build more than one building in your home and begin conducting business there, protecting your operation with armed guards as other players might come in and steal and destroy your stuff.
Now, most of this is possible with the technology currently in the engine, but a couple of technical issues will have to be worked out. It's not time for any of this yet, but since you asked I thought I'd lay out the basic idea.