Of course it's possible, you just have to do it the right way. And you don't have to remove a reward, you just have to make the reward suitable.
Say you copy-paste that scenario into an MMO. The reward is, you get to start a new questline, and join a new group. The terrorists. You get to earn their trust, and work your way up. Since it's an MMO, you should get more of a choice, so you might even do it because you agree with the terrorist group.
If you put a decision like this into a game, at all, especially one that is less linear than a movie (ie more than a single outcome to every scenario, including battles, that have a persistent effect on the world, or you character, unlike, oh, just about every game released), it should be very thought through. You should be able to examine it from the terrorists side, you should be given the oppurtunity to understand why they do it, and wether you agree or not, you should be able to act on it.
So, let's put it in an example. We have a new, shiny MMO. It depicts a battle between the two warring groups known as the, say, Siblings of Joy and the Family of Happiness, because they really like their own people, and their own values, and really dislike each other.
They live on a space station each, because they're in the future (and this way, we only have two locations we need to care about). Since this is a war we're depicting, and we want to make sure it feels like one, we make some changes to normal MMOs. If someone dies, they die, for real, but you can transfer your consciousness into a new body. This comes with major losses though, of all worn gear, and lots of skill degradation, death isn't cheap, after all, but we don't want to remove all of the fun (you can choose to start a new character instead, of course). Both sides also have a limited number of people on each side, after a while you're going to run out of respawns, one side is going to win, and the server restarts (or moves on to the next stage/station/whatever).
Now we make some guilds, or smaller factions. You can join them to start a certain profession, get a series of quests, improve your standing. We have warriors, we have medics, we have diplomats, we have spaceship builders. We want the player to have a real choice. And we have more hidden groups. We have resistance fighters, who like the other side better (living in Station Joy and liking Family Happy, for example), and we have the aforementioned terrorists.
The players can join the terrorists, they can initiate a series of quests that takes them on this very mission, they sneak aboard the opposing station, and they capture the hangar. Everyone who was there, wether npc or player is stuck. Even if they disconnect. We copy the scene from Modern warfare. Now comes the hard part. We need to build up the tension, and we need to do it without having players break character, or start screaming lol, or try bunnyhopping, or whatever. So, we take away their power. A lot of it. We've already made sure people don't want to die, and if they have to really concentrate to stay alive, they're going to focus (hopefully). We need to make it tense for both sides, both sides need to be able to fail, and we need to do it without the invaders just shooting everyone. So we say they need hostages. They don't know how many, but if the hostages get too low, they get stormed from outside. We also give them options to defend themselves. The defenders will have to hope someone comes along and saves them, or that they can find a way to defend themselves.
The motivation for the player will still be a bit of similar, you get a reward, and that's a problem, at least for the invading side. We have to make them care about the war first, like WoW players with Horde and Alliance. The defending side is already putting their lives at stake. If we have people taking on the role of the guy in Modern Warfare, they're already set. They have the same motivation as that guy, but this time, they're not killing off civilians, they're killing off their friends.
It wouldn't have exactly the same effect as Modern Warfare. Those terrorists are designed to be bad guys, and nothing else. Here, you'd have to make them more believable, easier to sympathize with, but the results would be the same. People would still die, and that's what you're going to have to stick with. It's a horrible act, but it might be the thing that wins the war. Is it still worth it?
I could go on, add more details, and such, but I've droned on long enough already, and this is already a bit jumbled, since I jumped between different issues while writing it (I think I sorted them out though, so they're at least collected, jumbled thoughts). I think I at least touched on all the points in the article.
MMOs have always intrigued me, they should be a very good tool for storytelling, for immersion, since it's other people around, but that's also the problem. A single idiot can screw up your amazing game, all tension, all atomsphere. A single habit, bunny hopping, strafing, whatever, can instantly single out a player, and tell you that you're in a game, every time. Despite this, I think it should be explored, as MMOs have a unique position to explore moral issues in games. In other games you kill a bunch of pixels, in an MMO you kill an avatar, you steal from an avatar, and a plot for revenge doesn't have to be scripted in advance, it's a player chasing you down.
Anyway, I'll just leave it at this, for now.