KillTenRats has a good commentary up on lore and its role in MMO games. Story in videogames is a tough thing to get right, and it's even tougher in a world where you don't just have one hero-- you have hundreds or thousands of them. (Sidenote: while it's not an MMO, Portal-- my vote for Game of the Year this year-- deals excellently with story, and you should read this long but insightful debate between N'Gai Croal and Stephen Totilo about it). How do you describe a changing narrative in a place where the world itself is designed to be persistent?
The common answer is world events, but those are still so complicated that even their little brothers, instanced events, are still in the stages of infancy. We may be able to clear out a castle in an instance, but can we destroy one? And the very fact that it's instanced means that we can leave, walk back inside the door, and nothing has changed. We chalk it all up to coding right now that the prisoner we just rescued a few minutes ago still remains in his cell, and we simply sigh, resigned to the fact that we're not really changing the world, just leaving it reset for the next group of players.
Still, there have to be some ideas floating around that could work to bring around a great story in a persistent world.