This totally breaks the model of the MMO though. It is by and large an "endless repetition" genre of game, and "completing" the game by finishing everything in a given server destroys that. And you lose a lot of scope to do things like be a merchant, show off rare equipment, etc. Plus, what happens when Player A doesn't log on for a week and returns to find that the server has been cleared? What content remains for him or her then? If the total server population is only 100 players, wouldn't the world seem desolate and empty unless every single player was online then too?
From what you've written I think you might be coming at this from the wrong angle. You don't want a pared-down MMO, you want an MO (multiplayer online), which is really just single-player++ deluxe. If Skyrim had a co-op mode it sounds like that would be most of what you want.