eq servers had large populations at one point and still provided the same kind of experience.
I can't speak for all EQ servers in the history of EQ, but I know for a fact that during Tribunal's heyday there wasn't half the population that could be found in Orgrimmar alone on Ner'zhul in WoW after a patch/expansion.
First: Mulligan, have you played WoW since they added cross-realm grouping with your bnet friends? The only restriction (afaik) is you can't do current-tier raids with people cross-realm (they're worried about breaking up guilds...).
As for the observation that in most MMOs these days you interact with players on other realms that you will never see again, well, it's a damned-if-you-do and damned-if-you-don't situation. On the one hand, maintaining a server-only dungeon fosters the community really well (and I personally find it to be more enjoyable). I think people play MMOs to interact with other people, not to play a single player RPG with other players around doing single player things.
Unfortunately, the other hand is the dreaded dead server that had a thriving population at one point then lost it due to whatever number of reasons you can come up with. Server merges are a really poor way to manage this because people have names they're attached to (names that will inevitably be taken when they have to move to a new server), friends that might not be active at the moment but could/will return at some point that they don't want to abandon, and maybe even server pride/nostalgia that ties them to the game and keeps them logging in.
I think a one-server-per-region approach with several instances of "uninstanced" content once the zone reaches a certain population might be the best solution to this. For example, let's say you want to go to Lower Guk to find a group. Upon crossing the threshold into Guk (you wouldn't necessarily need to zone, but I would think that the load screen would make it less messy to handle server-side) you would be placed in the first non-full instance of the zone. Let's say that Guk supports 5 groups of 6 people so when Lower Guk 1 reaches 30, Lower Guk 2 would be formed. Maybe have an LFG channel that extends through all instances of Guk and an OOC that is instance specific. If you're in Guk 2 and the group invite you receive is from Guk 1 then you can exceed the soft population cap.
You could do some neat stuff with that method I think (like randomly spawning minibosses that require a couple of organized groups). You might want to hard cap the zone at 40 or something to prevent massive zergs, but to incentivize killing him make him drop a couple pieces of better-than-average (for that dungeon) loot. I'm not sure how you'd want to handle loot, but I like how WoW handled their "rare" spawns in 5.2 where the tagging person/group gets the loot off the boss while everyone else gets the currency and a
chance(independent of the tagger's chance) to get what the rare spawn has on its loot table.
Anyway, what kind of creative solutions would you gentlemen offer to the problem of having open-world content that had you interacting with players you would actually see again?