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Yes the idea of cites/castles/housing would be well and great but in order for this to happen,
1. with the player own cities i *disagree* on this One because their will be way to many cities in the game causing Lag/ and it would cost developers alot of money to create all the cities not to mention space.
2.player/guild/faction *castles* seems great but I highly Recommend their being mainly Faction/Guild Castles But to obtain One of these castles for the Faction/Guild must Require at least a certain lvl of the guild and amount of People in the faction/guild, cause if not then every noob will just start a faction/guild and create a castle which will be like *player owned cities.*
3.As far as Housing, i wouldn't mind this, One, you can have storage and display Trophys*boss heads/claws/etc..* on the walls, crating benches, workshops, armor forges, etc.. and maybe at least have a Npc> salesman that stands outside selling your items (look at Dark Age of Camelot, Housing System)*defiantly the best ive seen in any game*
But yes over all its not a bad idea, just gotta use some brain storming and good developers in on it.