Indeed very cool, the proof of concept is surely there and it's looking very promising.
You mention that players' actions will alter the landscape, this could lead to very massive potential for all sorts of things, a fully dynamic world that is constantly changing.
The only thing is how are other players affected? I'm guessing you're sending map patches on-the-fly using your custom client mod ("injecting a dll")?
What are the implications of data bandwidth usage with this system? I know it's hard to figure out, so I'm not looking for any numbers as an answer here
Also, given that you do enable a "terrain phasing" feature, will there be the option to only display the changes to certain players, say, depending on their quest complete percentage for that region?
This is what World of Warcraft does, the more you advance through story-line quests, the more the map and terrain and monsters change to suit.
If your system can provide this in the future, I'll be one extremely impressed and gratuitous developer
Just a note though, if you are using an "on-the-fly" method of patching client files, you may have just stumbled upon the most efficient way to provide shard patches, given there are so many people who don't want to run 3rd party applications alongside UO