Should the Devs allow players to alter something so big?
I don't think it will be quite that advanced. I think they are just over-hyping things, but it will still be good if they pull it off.
Here's how I think it will work. The core world will be made by the devs and will not be very modifiable. Players maybe can put housing plots in various places and stuff like that, but these will be pre-built art assets that are placed down by the player, kinda like Vanguard and lots of other games, just a bit better. Between that, and stuff like burning down forests or whatever, you will have to say yeah I suppose this is a player shape-able world. But not a whole lot more than what we have already seen before - housing plots in Vanguard and burning areas in Rift. But all that together in the same game, pretty good.
As for the actual player made content, I think that will be separate to the bulk of the game. There is a Brad quote recently where someone talks about boring "theme park" games compared to sandbox games, and he says something like - the future is having theme park aspects within a sandbox game. I think the sandbox game will be what SOE make, it will be a huge world with lots of decent content like most other MMO's and some standard dungeons and stuff. But the players will make their own stuff too, but that will be kind of on the outskirts of the world. So in EQ terms, it will be like Antonica is SOE made and can't be messed with, but travelling to the edges of that, you reach some kind of outlands where there are big open areas with player made dungeons and player made cities and stuff.
I also think that the content that players make, will be very strictly controlled by the development tools. Like I said before (a million pages back now..), when a player makes a new item, they will get a pool of a number of points to spend on the weapon, so they can customize it in various ways making it lighter or faster or hit harder, but you can't have everything. You have to increase one slider and another slider goes lower. And the building of dungeons and battlegrounds and structures or whatever else, will work in the same way. You will only be able to place a certain number of mobs in the dungeon, and a certain amount (and value) of loot, and there will be limits on how close mobs can stand to each other, and what angle walls can be placed and whatever else.
If they get it right, it could be really amazing. If not, it could end up being a bit of a mess, but might still be ok, and we will still have the SOE made world to play with anyway.