I think a mixture of both is in order. The thought of tying in special events with the game would allow for micro DLC and expansion packs for larger items.
For example a special Halloween event or Christmas type event could provide special armour, weapons, etc. Maybe a spell that turns enemies into reindeer or something, who knows. For these I think most should be free, maybe a couple of premium items. Just little things to help keep things going between expansion packs.
The bigger thing that would be awesome though would be some sort of world toolkit similar to what they provide for Skyrim, Fallout, etc. To allow people to extend the game as well.
I look at DLC for a PC game as things like, enhanced graphics packs, additional game audio, armour, weapons, maybe an NPC or two. Where the Expansion packs are more like the game add-ons of old, adding additional gameplay, new quests, equipment, areas, etc.
My two cents.