"Solvable problems do not drive Story. Choosing that Weapon A and Armor Set B to help you kill Monster C; that's not a choice. That's a problem."
From the development side of things, you need to understand what things are going to cost, in terms of money, time, and player experience. Make the outcomes as easy to anticipate as possible. Players are happy with just a bit of text in patch notes explaining a small change. Don't think that every massive change has to be a grand event.
Learn from ARGs. Simple entry points are the key. Make announcements in your patch notes, have a herald in your town square. The more people you can get involved, the more dynamic the community becomes. Once they're in, you can make the interactions as complicated as you want. Don't worry that you're designing something that seems too complex; someone knows the answer, and someone will share that answer. There's a fine line between things that are interesting mental games for us, and things that are interesting to the player, but if you can engage the community, you can do whatever you want and somebody will figure it out.
How to patch when the events have been resolved? Players are okay with waiting a month for a patch. What to do when the players do something that no one could have predicted? "Panic overnight, then lots of text." Put in a live-action NPC, someone who's there to provide in-character explanations of what's happened. That helps immersion. The stories that are important are the stories that the players tell to their friends about their experiences in the game.
Player politics: Allow player-created stories to affect canon. Guild v Guild battles, for example. By creating fiction around the results of player-led battles, you give your users a personal stake in the game, a way to feel involved. The strongest type of community will grow out of this.
Finally, create conflict. Conflict is exciting. Create reasons for players to choose sides. World of Warcraft makes players take sides immediately with character creation. This all by itself helps with setting and the beginnings of heroism. Later, once the status quo has been established, create common enemies. Find a way for opposing sides to band together against a common threat. This can be used to create even stronger community bonds, and changes the story dynamic for the better, making the world that much richer.
We'd like to thank James Portnow for the panel, and thanks for reading!