Recently there have been a few good posts about MMO quests on some of the blogs I read, such as MMOre Insight (Make Quests More Fun), MMOCritic (Quest System Design), and maybe a few other MMO blogs with MMO in the name as well. I similarly think there is a lot of room for improvement in the way quests are implemented.
I think one of the main drawbacks to quest systems in current MMOs is that they limit the number of people you can adventure with. When I played Final Fantasy XI, where quests were largely a waste of time, and level progression was pretty much just based on the traditional model of camping and grinding the standard zone track of Valkurm->Qufim->Khazam, the only limiting factor for grouping was the viable level range for grouping and classes needed.
But in EQ2 or WoW, you also have to worry about whether potential group members working are on the same quests, and what step they are on. So the net effect is that the community, already fragmented by level range, is fragmented further by quests. Compound this with the fact that most modern MMOs make it easier to solo, and you end up with a lot of people playing the same game separately because its often too much trouble to find people to work on the same quests you want to while inside the game (of course, we can rely on our guilds for that, but then we're still only interacting with a subset of the community...)
EQ2 recently revamped its LFG tool and increased the number of quests that could be shared (sparing you the monotony of having to wait for people to run to the quest giver so they can party with you.) These are obviously attempts to encourage grouping and make it easier for people to go on quests together.
But I wonder if fixing the LFG system isn't the right way. Maybe instead of collecting billions of random (mostly fetch/kill) quests in our quest journals, most quests should be more transient: something you grab when you go out on the adventure itself instead of carrying around with you hoping to find someone else who wants to work on it too. I think City of Heroes had some things right in this area: people would generally find contacts who would assign quests linked together by a storyline. If you chose to bring along help, the quest would scale and be shared accordingly. This makes the grouping system the best I'd ever seen. Generally, within moments of logging on, I could find something to do.
This idea could easily be incorporated into a fantasy game: adventurers could gather at inns where they could learn about quests by overhearing rumors, or randomly an NPC might come into the inn and ask for adventurer assistance. Guards and wanted notices might dispense kill quests that players could share. The point is, for most "quests", we should simply be able to grab it, recruit some allies, and go.
My ideal MMO would also turn some game mechanics into quests of sorts. For example, in EQ2, there is a fence that sells goods from cities of the opposing alignment. I think it would be neat if the items in that auction didn't appear unless some player(s) somewhere took a quest that made them go into the opposing city to pick up a "package" which they then have to bring back home (perhaps limiting the ability to teleport with some game-related excuse), with bandits spawning along the way. When they get back to their home town, they would have to smuggle it past the guards. Each time someone did the quest, more items would become available for sale. You might even have players pick the type of good they want to smuggle. Food is perishable and would therefore have a time limit or the mission is a failure. Arms and armor are harder to transport so while they might get paid extra, a penalty might be applied to their movement rate, or guards would be more likely to detect them. And so on...
Similarly, the game could create repeatable escort quests where you follow a caravan on its way to an outpost (perhaps the quality of the goods that appear on the NPC merchants is determined by the number of players who participate.) The enemies you face on the way would scale according to the level of the player or players that go on the "quest."
Ideas like this could make it easier to find groups. Or at the very least, it would reduce the clutter in our quest journals (quest journals should only ever contain truly important story arc quests that would probably continue to operate the way they do today.) So "real" quests would be more special, and the standard delivery/fetch/kill quests we do to break from the grind would at least feel more important since (by tying some of them to the game mechanics) they would have a visible impact on the world.