What I'd like to see and what hasn't been tried so far as I know is something like an episodic game (think Telltale Adventures) with MMO trappings. Buy the game and initial episode for 20 to 30 dollars. Then purchase additional episodes if you want to expand the content.

Sillies on the other hand includes all those other things that people may or may not care about. House pets, furniture, clothing or just about anything that make you look different without actually giving you a bonus. Even when I was a hardcore raider I cared about my look to a degree. If two pieces of loot were close but the weaker one looked better, I'd take that.

I think a wise model would be subscription+. The client should be free and you should be able to experience perhaps the first 25% of the game without cost. If you wish to move beyond that you can have a one time purchase cost (the box sale) and then a subscription that is in the $4.99 /mo range. From there, use the same methods that Freemium games do.

Retention should be about the same as with either model and possibly higher. Due to the subscription fee players might see the game as more "secure" and a great value. Beyond that, if the game focused heavily on community and guilds players would make social attachments and, in my opinion, be less apt to leave.