@OP: Yes, NWN PWs are based on the MUDs of yore.
I played on some NWN1 PWs. I had some really fun times on ones like City of Arabel and Escape from the Underdark. When they work, there is nothing that comes close.
But one of the problems with truly open roleplay servers is they tend to attract griefers. Both evil characters who ambush you the moment you're alone in the woods together ("it's what my character would do!") and good characters who spam Detect Evil on everyone so they can metagame. ("Trust not thy companion! He carries the taint!") The DMs aren't always on to curb this sort of thing, and even when they are, they're usually off catering to their favorites with special events and too busy to make newcomers feel welcome. Finally, leveling up is a chore (you have to wait for server resets to redo quests usually) and being low-level is extremely boring for most classes - particularly when the handful of folks who kowtowed to the DMs enough to be high level run by in all their bling or shapeshifted into fire elementals etc. And threaten to lock you up or grief you for looking at them cross-eyed. Plus you really feel the limitations of the game engine when casters can't fly, or there are only certain spots where you can try to jump/climb/etc.
Add to that a single death (often due to lag) resulting in weeks of work being erased, and the frustration tends to eclipse the benefit.