Interesting idea, Bushie, but I have a few suggestions of my own on your idea.
Creating towns and new levels is an interesting idea, but that is kind of too much like the Sims. With many, many players barging into the game, there will be a little too many towns unless a restriction is imposed. A way will have to be thought of to pick players to have the ability to found new towns, as simple numerical restrictions will never work, especially if a, erm, newbie takes control of a town. Imagine...
Before you start having things pop out of nowhere, there should be available resources to construct a town and settle it. For example, NPC/player settlers, wood, stone, marble (if possible, though interesting), brick, and so on for buildings, and so on. A ready source of food should be thrown in, even if nobody does need food to survive. However, there should be some relation to realistic things in Planeshift, I think. Still, an interesting reply.
By the way, nobody can blame you for not reading through the whole topic. Time is always of the essence, and so is how interesting each post is to read.