**I am aware that the numbers presented are not accurate, they are merely used to illustrate my point**
Are you expecting anything else? Use some common sense. The server is effectively running hundreds of games simultaneously. How well does your current system handle games? Now how would a system which is half as fast...and half again...and again...
Everytime you double the number of players (1, 2, 4, 8...500+) you are also doubling the workload. If you are not entirely satisified with playing on a 486 processor, do you really think your players will be satisfied using a server that handles the communications like it was one? MMOG are a horse power hog. Other than just game servers, most have a seperate server to handle the AI within each level, not to mention handling zone to zone transitions, player files, backups, the list goes on and on... You could easily spend several hundred thousand just on one server farm for one game world.
Now as far as bandwidth goes, last give each player a mere 25 kbps connection, now you want how many? 10, 20, 100 or more? Take that 25 kbs and work it up. So 10 players will kill your ADSL. 100 players would nock out a T3. See whats happening?
MMOGs are great, but they require a lot more in resources then your average independant can muster. Also when you take into account that the total scale of a MMOG (graphics, AI, pathfinding, Database, Networking...) most small production houses would be lucky to even complete a proof of concept on one to get funding for full scale development. It is a good thing to look before you leap and do your research. While I am not saying it can not be done (Kevin Ross is proving that it can - BTW has anyone heard anything new from them?), I will say that it won't be done often.
**I am aware that the numbers presented are not accurate, they are merely used to illustrate my point**
