Have you played LotR Online? Despite following a storyline that most people know, Turbine has managed to put you in the thick of the action. You go on quests with famous characters. There is a whole questline where you gather everything needed to reforge Aragorn's sword.
MMO's don't need to be devoid of character development and dramatic storylines, they just need to make it accessible to all characters. Yes, it's difficult to change the game world as a player, but there are ways to create the illusion. Using instances for major plot developments is a way to do that. So where a low level character might find Strider at the Prancing Pony early on, higher characters can see him at Rivendell via instanced rooms.