Sounds neat, absolutely possible. It may not be pretty, or intuitive, but you can easily design the tools for players to succeed, and then sit back and watch.
As for the space the game would require, most of that would be on your hard drive. Not RAM. and any saves would be saved server side. Depending on the engine they use, creative use of portals, or cells, or even just coded triggers would easily manage the system resources without any issue at all.
See, they're aiming big, and I like that, but what they're also saying is that..players decide everything. They give us the tools, we do what we want.
The risk factor is huge if the game does not start off well, it will not make it past a week. The community would need to be near perfect for the smaller scales villages we'd all start out with.
I like the idea and I like the ambition. However i think maybe they need to make the scale a little smaller and see how that goes in a demo maybe. Everything in this video is entirely possible, but it will not be so on release, it will take time for things to open up, as we advance through time, they will add more things. I can see patches going by era. It's an interesting idea. Right now though it's just that..an idea. They'll need to show something for this to get really interesting.