Only because unixmad seems to read this thread and commented I will put serious input-
I see good potential (sp?). If done right you could make this really fun, I dont know exactly how though.
Graphic wise I can't say much, framerates are low for me but then again I have a Radeon 7500LE so thats obviously why. I LOVE THE SWIMMING. The character's swim animation looks good and I just love going underwater because of the affects. Maybe have some treasure hunts

?
The nature looks good, I love watching the water from a high point.
The town is OK, needs a lot of work (BUILD A WALL) but suits the job for now.
Characters looks ok, you need a perm first person button and make it so that when you look up while in first person, you dont see any hats or caps or anything. Make it so characters can climb! Thats a must in 3D mmorpgs.
And come on, the snowmen look like turds. Atleast give them mean eyes.
Thats just my random comment since a server on another mmorpg is down >_>