I would actually go further than this. Make a map editor so people could easily create different worlds and set custom sizes for those worlds. Also add more configuration options like max players as you suggested. There shouldn't be any cap on anything. Players could just scale their game to whatever hardware they are using. You would have small servers, medium sized servers all the way up to servers bigger than the current MMO. More options would not be a bad thing. I think players would do a much better job, I've seen YO servers that have more people online then some MMO worlds at certain times of game. Clearly these people are doing something better.
Just my opinion, but in any case I support your idea 150%