It's an interesting idea in a raw kind of primordial sense, just too, limited and specific to be of a wide use.
You're right, it would make a great game.
ONE, great game.
The problem here is that it would make that one great game, but you're trying at equate a novel idea to a large game design paradigm.
You're right, if you look at it from your view point it's a bit tired and played, but, there's a reason why it's been around for so long, it works, not in a short one time interesting little game idea way, but as a making successfully working rpg games way.
It would be an interesting concept to develop into something that would work on a wider scale, or to develop more along the specific lines you're talking about for a specific game.
As an MMO it would never work, period, ever. You could possibly get a niche gamer market, and you would get lookyloos to stop by and check it out, but as an MMO, no. This type of game would have to be a single player majorly story driven experience since the story would be taking place of the leveling up.
Much of this is interesting in concept, the only way in which I feel your thinking is flawed is in how you're trying to relate a specific more narrow concept to the wider paradigm, missing seeing the actual big picture. Also the whole "the only way we'll break out of the usual is by doing stuff like this" thing is a bit nihilistic and short sighted. It's not the "only" way, it's a way, but that thinking in itself is also more of the "same old same old" thinking you were talking about. Personally I've had some of the same thoughts you appear to have, but, instead of trying to make some grand chaotic change and just see what happens I'd rather take what works and do something new with it, fix it, make it work better than it has before. It's evolution. Creatures don't mutate into an entire other species, they change and mutate to a degree.