Have you ever actually looked at a sandbox? I mean really looked at it. Go to any playground with a sandbox and take a good, long look. Or, if you have kids, go look at their sandbox, pile of Legos, building blocks, whatever. Notice something?
What you should notice is how it's just sand with a few broken and discarded toys half buried in it. There are no sand castles, no messages or pictures drawn with a stick or finger, no trenches or roads for toy cars, there aren't even any footprints. Just sand....
Same thing goes for Legos. Yeah, some kids will make primitive little cars, planes and houses, but most kids don't bother when they already have access to Hot Wheels, Micro RC Helicopters and pre-built playsets like Barbie's Dreamhouse and the GI Joe Doom Fortress. Why make your own when someone else has already made it way better than you ever could?
That isn't to say that nobody gets the sandbox. Their are kids, and adults, that do amazing things with Legos and other Do-It-Yourself toys. But most of the time these projects are done individually or in small teams. There's only so much sand, so many Legos, so many building blocks, etc., to go around. In a public play area, the minute you walk away there will be someone there to tear everything you did down to use in their own project. In a public play area, there's going to be one big kid that runs around tearing up other kid's projects just because they know there is nothing that can be done about it.
And this brings us to the big problem with the sandbox MMO. If you let everyone play in your toy box, most people will just break your toys. Millions of people, operating individually or in small groups with the goal of finding the absolute limits of what can be done and accepted socially within the game. And when it comes to sandbox games, it seems that people will put up with quite a lot.
Just wander on down to The Sims Online or Second Life to get an idea of what a sandbox game can turn into. Remember, TSO doesn't have combat of any kind. I don't think I even have to discuss Second Life any further. But a Sociolotron level of freedom isn't exactly what most people have in mind when they talk about a sandbox MMO.
Most people are generally referring to games along the lines of Elite, Harvest Moon, Sim City, Sid Meir's Pirates! and etc. Notice that I'm not including games like Grand Theft Auto, Fable, or Assassin's Creed in my list. There is a difference between actually participating in a game world and just running from place to place in a never ending quest to check off another task from the "To Do" list. If you consider GTA style gameplay to be a sandbox then you have everything you could ever want from WoW.
Back on topic... All of the aforementioned games are considered sims, mostly of a business variety. I can't really think of any RPGs that actually qualify as open-ended sandbox games. The Elder Scrolls series is basically a first person fantasy based GTA. As is Fable and Two Worlds. It doesn't really matter what you choose in those games, you're still expected to save the damn world and your moral choices are only reflected in a handful of "good" and "bad" endings. Yes, you can continue to play Morrowind even after you've finished the main storyline, or even ignore the main storyline altogether, but game wold is static so you eventually just run out of things to do.
At any rate, the most successful sandbox games are single player affairs. You have absolute freedom because you're the only person within the gamespace. Add even one other person and your ability to affect the world in any lasting way diminishes by an order of magnitude. For those of you that play Animal Crossing, go visit a friends town and completely trash it. Now you've destroyed everything they've done and placed your own mark over it. Multiply that by several thousand and you now have what it's like to be in a sandbox MMO.
As of right now, there are only five sandbox MMOs that I'm aware of. These five are The Sims Online, Second Life, Eve Online, A Tale in the Desert, and Sociololtron. We've already talked about the three Ses, so I'm going to focus now on Eve Online and ATitD.
Eve Online is the spiritual successor to Elite, sans the twitchy dogfighting. This is a straight up business sim complete with diminishing returns. Right now, I believe that Eve has about 250K subscribers all on one massive server with a user count that has hosted over 20,000 people concurrently. That's pretty impressive all around.
Eve is also one of the few games to feature limited FFA PvP. Basically, the universe is separated into security zones and the police will intervene in 0.4 security space or higher. That doesn't mean you can't attack another player in those areas, it just means that the local police will blast your ass to kingdom come if you do. Since the shuffling of money is such a big issue in this game, theft is actually and integral part of the game mechanics. Defending your more expensive assets, Capital ships and factories, from attacks absolutely vital and always requires a group effort.
That's why Eve serves as an excellent example of why the arguments in favor of sandbox style games both work and don't work. Yes, you can leave a mark on the game world. The catch-22 is that you have to work as a group to make even the smallest mark. As a result, individual contributions become further and further marginalized to the point that you become assembler #237 on factory line #BD17. Those that got into Eve at launch and stuck with it have all the notoriety while everyone else works on behalf of the founders glory. Since no one permanently dies in Eve, unless they're fucking retarded, there's never a power vacuum that needs to be filled by other equally talented individuals. Hence the iron grip of BoB.
On the FFA PvP side of things, Eve offers an excellent example of how it could work and why total FFA PvP wouldn't work. FFA PvP works in Eve because there are relatively safe zones where newbies can make money before forming or joining a corp. Without those high security areas, there could be no headway for new players. You would have to join the first corp that you encountered or get blasted repeatedly. No new corps could be formed because there wouldn't be any unaffiliated players of sufficient number to create an adequate defense. In short, you would have no choice as to what corporation to join or even the ability to form a new corporation.
Player driven justice would also be lacking due to the fact that whatever got destroyed would still have to be replaced after revenge was taken. Not to mention the fact that corruption would run rampant. Player A gets ganked and puts a bounty on the heads of players B, C and D. Player E then works out a deal so that he can kill B, C and D giving everybody involved a cut of the bounty. Afterwards, B, C, D and E go gank player A again and mock him for being such a naive, whiny little douche bag.
Moving right along... On the opposite end of the spectrum is A Tale in the Desert. There isn't any combat in this game. Instead, player build things. The more complicated a thing you want to build, the more steps you have to go through to produce it. This means that you can make sand bricks pretty easily, but canvas requires you to plant and harvest flax, separate the flax into something resembling wool, spin the wool into thread and then weave the thread into canvas. Did I mention that you're also going to have to make all the tools that you need as well? Yeah, you're going to need to make the thing that separates the flax (can't think of it's name right now), the spinning wheel and the loom. You can use other people's stuff to manufacture things, with their permission of course, but that's the "meat and potatoes" of the game.
The reason you're building all of this stuff is to pass 49 test individually and then seven monuments collectively. Once the monuments are built, the game restarts and a new telling begins. It's all basically a social experiment in cat herding. Take all the drama of being in a raiding guild, mix in the business management of Eve Online and you have the draw of A Tale in the Desert. More than any other sandbox game, that is more game than sandbox, you are allowed to make an impact on the game world. It's still takes one hell of a lot of effort, but no more than if you actually focused on becoming a key community figure in a small town of less than 20k people in RL. In other words, this thing can take over you life much more easily than WoW or EQ.
None of this is to say that there aren't griefers, but players are free to produce their own laws and the player of highest social ranking has the power to actually ban individuals that cause enough problems. Even Eve Online won't go that far.
Ultimately though, I think that people actually want something like ATitD mixed with player made factions and combat. The problem is that your actions are already marginalized without combat due to the law of averages. With combat, it becomes absolutely impossible to change the game world without being one of the few that were there from the start. You might be able to offset this with character aging and permadeath, but it's not that difficult to let your guild know that your starting over and continue running the show with a new character.
Making a single player sandbox is fairly easy. Making a multiplayer sandbox is easier said than done. Just tacking a sandbox philosophy to FFA PvP doesn't give it legitimacy either. I'm sure that someone will eventually get it right. Although that will probably not happen in my lifetime.