If you think about what a MMO is and then letting a customer make mods to it, it can be a bit frightening.  That is why the upcoming Neverwinter will disappoint many, you will be quite limited in what you can construct.

Fine to make moding available to a single user experience, not so with a MMO.  You have to have strict controls on what the customer can introduce into your game.  That means a lot of expensive policing of such.  Some things like housing is fine, you can restrict somewhat the design, contents and location.  Adding actual content is another thing.  

As a developer, you have to very careful what you introduce to your game with UCG.

UGC is the way to go. The difficult task is how to implement it within a MMORPG and without breaking any gameplay elements or bring in serious balance issues or break the game.

I personally go even that far, that a MORPG(cut out the Massive Part, just for 200-500 players at once) with heavily Modable Content/Servers, and the ability of Private and Public Servers with all kind of rulesets and modded content would be a very interesting way to go. (Old Neverwinter Nights expanded)

And why just MORPG? Because for private servers it will be rather hard to support more(to expensive). And a smaller overall player base would be healthy for the server community.

"Imagine a marketplace where players could purchase content created by Zenimax Online in addition to content created by other players."

Why pay money to a company for the privilege of creating content that they will turn around and charge players for? Maybe players can dream they are big time developers with UGC? /shrug

"First off, we do have to recognize that The Elder Scrolls Online is still an MMO, and so dreams of some of the more popular Elder Scrolls mods that may or may not be dancing in your head (incredibly voluptuous female player models, anyone?) are not likely to work with this particular format."

I would just like it if Zenimax would actually put attractive females, without having to "jiggle the handles" so much, into The Elder Scrolls.  I'm not talking about super-models or California beach bunnies, just women who do not look like they hit every branch of the ugly tree on the way down.  I followed every formula I could to try and make my favorite fantasy-genre character of all time, a female Elf Ranger, without downloading mods, which I eventually had to do, anyway, look attractive.  Is it important in a game, especially since most players are in first person?  Surprisingly, yes.  It should also have an effect on the game when a player takes the time to make their character a bit more charismatic, good-looking.

Now, the Oblivion mod community has, indeed, done some amazing work... Battlehorn Castle (I think that was done by a community modder?), Better Cities, Kvatch Rebuilt, Unique Landscapes, Oscuro's Oblivion Overhaul, and there was one other I can't readily find the name for, anymore (where you had to find a series of books, and there was an Archaeological Guild) are some of my favorites, ever.  Unfortunately, after my computer crashed two years ago, I've not just put it all back together, which means I don't have access to my favorite character in the game, anymore.

For me, this topic could go either way, as there's a great chance, even with developer oversight, of abuse.  It's like the laws here in the United States, we have a GREAT set of BASIC laws, but over the past 250 years the length and breadth of those laws has become terribly distorted, to where the original laws mean very little, anymore.

On the other hand, if Zenimax could keep an enormously tight grip, allowing in only the top 1% of all mods that come across their desk, perhaps that would be acceptable.  Again, I've not been able to play Skyrim, yet, so my experience is limited to Oblivion, but that game is absolutely amazing on its own, and I have no trouble believing that ESO will be in the very same boat.  No modding necessary.

People only care about User Generated Content in MMOs when it can be abused and exploited.