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You very clearly don't understand the complexities involved here, hardware can only do so much and the record for concurrent players on the same server is held by an MMO called EVE Online and it literally took them a decade of work to manage those kind of numbers with a massive cluster of servers, it really doesn't work for most games, can you imagine trying to sit in a hub town in an MMO where you currently have 12,000 people logged in, its not only the server that will have issues but any client trying to render all those models is going to run at about 1 frame per week
Thats not a forced things, the client just generally struggles with that many people, the slowdown you're referencing is called Time Dilation which slows down the server simulation in order to crunch all the required numbers, they added a non-graphical toggle to the client to help during fights where you have 3000 ships in the same place
why not just have channels like Runescape?
Because those channels are just for chatting, they will still be individual server instances and it still won't be 1 big seemless world
Something similar to what Valve and Team Fortress 2 do, there is a server specifically dedicated to storing account inventory information
Cross region transfer is a no
If they don't feel like coding the system too much it could be simplified further to the manual "instances" that are yet again not an edge technology. I think I saw them in some MMORPGs before, or from some pretty old multiplayer games like APB or even something way older like Crossfire. Then let the users choose them manually if they wish, for example, the instance #2305 for you and your friend, keeping your progress between the instances. This has its own issues if a game relies on PvE player/player competition elements like grinding the resources for production, but fixable with the more advanced system like above, and even as is it is still better than the "hard" servers imo.
TESO also is a dead game without 30,000 people trying to login and be in the same place at the same time, pretty sure their entire active playerbase would fit in to a single WoW realm lol
Depends how characters are handled, there is a fee to move your character between servers in a region so you won't be able to "hop around" as you'll be on a completely different character