There's always the fair share of controversy about which MMO did what first, but in this case, it can be settled by just quoting an older precedent. Live events are modeled after the interaction of DMs and players in the modern tabletop RPG, such as Dungeons and Dragons. Back in the heyday of tabletop RPGs, DMs and players were crafting meticulous, amazing worlds together, giving feedback through rule-bending, arguments, exploitation, and storywriting. But this sort of thing wouldn't stay just with tabletop games.
Traditional, single-player RPGs tend to have a lack of developer interaction with the customer base because, hey, it's single-player. Taking after these, MUDs began to spring up, and a rediscovery of RPG roots began. Now, with massive worlds filled with the myriad possibilities of storytelling, both players and operators found themselves back in the old environment, where feedback was given and story tweaked through developer-player interaction. Some just couldn't handle it, and never held developer-player interactions. Some did. And this led the way to the current batch of MMOs, which are based upon MUDs.
I'm not going to say which MMOs were first in the area of live events, but I will list the major ones, especially ones where it genuinely impacts the story. Myst Online: Uru Live, The Matrix Online, City of Heroes/Villains, and Dungeons and Dragons Online (never would have guessed!) are all prime examples of developer-player interaction.
In Uru Live (or MOUL for short), the ResEngs (the Uru equivalent of GMs; stands for restoration engineer) took part in crafting the story, and so did the developers. In MxO and CoX alike, the developers would take the places of major characters in the MMO's universe and play them, added to the mythology. In DDO, GMs basically take the place of DMs and replicate the feeling of a true tabletop RPG. They craft huge story arcs and interact with the players quite a lot, even if sometimes technical difficulties get them down.
Some MMOs, though, have little-to-none in the way of developer-player interaction. The most glaring of these is World of Warcraft. The addition of live events would spruce up the game experience and only improve the game. Players are already crazy about the lore as is, imagine if they got their hands on new lore every few weeks? Everquest and Lord of the Rings Online also seem to be missing these large-scale, genuinely impacting live events.
Games can only get better by incorporating these sort of events. They allow players to interact and give feedback to the devs on a personal, face-to-face basis, and this can only lead to better games. And, in the aftermath of MOUL's Season One, the lack of live events in a lot of major MMOs is glaring, thanks in part to the skill in which it was handled in MOUL.
Each week James Murff writes Under The Hood, a deeper look at MMO game mechanics and how they affect players, games, and the industry.