games like ragnarok online work on a multiple server basis.. but those genrally act like a map server, so litrally a map is hosted on a specific server.. but, to get around such a limit as 256 players, maybe there is some way of daisy chaining servers? like have servers talk to each other.
You would need to reserve X amount of player spaces for the other servers per server.. so say you had 4 servers, each server could hold 252 players and have 4 slots free for the other servers to connect too. they could swap data and each server relay it to its clients in turn, allowing up for 1008 players (for a four server daisy chain.. Max Players = (256 - NumServers) * NumSevers... or something)
...i dunno, it wouldnt be that fast i suppose unless you were heavilly optimised.. these are just random ideas running through my head at 5am before going to bed, i aint thought it through

but if such a system of daisy chaining could be pulled off then it opens up the mmorpg possibilitys. You could even host each server on a different machine, really lightening up the load rather than 1000+ players all running through one
Of course, just something that hit my head as another possibility, one master server for servers.. ie, each server can hold its full 256 players (or 255 i think) and relay its info to a master server which in turn relays it back to the other servers... then each server wouldnt have to contact all the others itself, just one, and then the master server could take care of nothing but relaying the info properly (and again, master server could be its own machine so it would have a fair bit of resources to play about with, bandwidth is the main issue)
So, as a lil example:
(S = server, MS = master server, - \ / = psuedo links)
Daisy chaining method:
S - S - S - S
\ /\ /\ /
(badly drawn i know.. trying to show that each server sends it data to ALL the others, not first server passes data to second, second passes data from first and second to third.. that would be bad)
Master server method:
MS
/ | | \
S S S S
Daisy chaining would be pretty intensive on all the little servers.. but it does have a bonus. If one server went down, it could just be left out of the chain and you would just loose 256 players, everyone else could be fine and the other servers can go on talking to each other
If you went for a master server then it would be less strain on the game servers, but if the master server went down, goodbye all 1008 (or however many) players :/
..you know, im not even sure if im on topic anymore >.> bah im tired!

i'll stop waffling now and goto bed.. but its food for thought at least ^^