Honestly I can see both sides of this argument. You can't make the player a Zelda style "hero of time" type character where they are the only hope because they are prewriten to become the savior. Yet we do need to be more involved. They need to take the characters from the "just passing by" character to the "This battle would have been lost without your efforts" character. If I get to rank 50 I should be more than just a "cannon fodder" player in the story. But you should never be the Main hero because then everyone is said "hero of time" character. Make your character seem like a crucial part of something bigger (something that you can envision all the payers being part of) and it gives you your epic without ignoring that you are one of many.
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I think the idea of adding character attitude is good and bad. Good because I don't like my character being an empty shell. But the idea of dialog options means that people who don't want to be a preset identity can't truly express themselves.

There are some solutions though. One is close to what we have now and it is basically just an improvement of what they have done. The silent protagonist. Sure they don't speak but you get who they are from facial expressions. Look at zelda (I seem to be using this as an example a lot) Link has a lot of personality and comes off as a convincing player and yet is identifiable with everyone as he is left just open enough to be anyone. They just need to work with the player characters more during the creation of stories more in the future to make them more emotional and accessible.

The other plan (which I doubt they would take but I will post it anyway to see what people think) is for you to make the dialog. Either add some minimal (though effective) voice recognition to the system (or just typing) to the stories.
Here is an example of how it works.
You get a quest to save a little girl (once again just an example) and someone looks to you and says "what are we going to do?" you then get a dialog option of good or evil. You could click on your answer to choose (for the RP haters) or you choose your response by saying (or typing) your response. and the system is set to give you a phrase to say for each option. So to pick good option you say "save the girl" or to go with the evil response you say "kill the kidnappers" or both for a neutral response. The system then picks up the "keywords" and makes the NPCs respond appropriately. They could also add a volume measure or pitch measure to monitor how much emotion you are trying to put in your character so that he/she animates to how you are acting, so you even look the part of an over hyper nut, or cool headed tactician. That way you get to choose your character's attitude and you get the exact personalty you want.
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The romance options would be interesting. But you left out an important part, Players being love interest. Betelgeuzah was right to say that a lot of the story of an MMO comes from the players and it should stay that way but he seems to overlook that the set story could ENHANCE that. If some lucky son of a ----- manages to get his girlfriend or wife to play as well wouldn't it be ideal for their characters to fall in love (with high quality, emotion filled cutscenes?) Or if two people RP as lovers could a story line not give that love a good story background? This could be extended to other roles like rivals, or best friends. I say the more players you allow to get involved with your story the more it enhances the RPing and community. Oh and leave it open for using NPCs some people may like this but not want to use their friends to RP it and may be single.