What about the whole different strokes for different folks cliche? Some obviously want a totally chaotic society, where might makes right, others want strict laws (read coded rules). If you designed from the beginning the ability to have variants based on this (and other argued game features) then you could better implement different shards(UO induced obviously) with different standards.
Some ingenious fellow, not me, could fit this onto each shard (diffent locations behaving differently). This would make it easy to have conquered (evil) towns, where the roles are switched somewhat.
This could be dynamically implemented by GM's and programmers. Again, it would, IMHO, be better to have designed this from the start.
But I think a fame attribute is VERY important. Asheron's Call has a good idea on this.
As far as the rumors idea goes, this would be a good start to limit abuse of game structure faults. (e.g. Ten UO "Great Lords" killing others, newbie or not, by tricking the criminal flag feature). In the example, many would see this happen, but would just have to continue on in frustration as these char's reaped the benefits of having "good" chars.
I have seen some well played evil chars out there, and I thought it added a much needed edge to the game. However, if a bunch of punks that play 24/7 go around rampaging just because they get off on frustrating others, then a rumor idea, might make it much harder do this and still be seen as a good character by the gaming world at large.
After all, if you only get a chance to play about 2-8 hours a week, you still wan't to play and have fun. The game wouldn't sell to many in this case, if it didn't protect them.
However, as stated above, many like a full dog-kill-dog world (or area) and they could have it!
btw, I agree that too much reality can be bad... after all this is an escape. Would anyone here make a game called Life Sucks, where your char spends his life driving in horrible traffic to work, is given past due deadlines that he/she is now responsible for, only to be chased by (player or NPC) rampaging IRS officials, and bill collectors?
I like the rumors/charisma thing, as well as the idea of graded experience.