Having played just about every MMO of the past 10 years, I'll state right now that the best was Ultima Online. There isn't even a debate about this. Every single MMO since has copied many, many elements and most have still failed to even do that as well as UO did.
Dark Age of Camelot for me is the modern day MMO that got closest, but failed due to a very poor development strategy and the reliance on paid for expansions which were barely optional. My hope is that MMOs learn from Eve Online regardning expansions - have a slightly higher monthly subs rather than expecting people to fork out every year for another expansion pack, this inhibits the recruitment of new players.
Back to the main point - Ultima Online, Pre-publish 16(trammel/felucia split) was the best PvP, best PvE, best exploring, skills, crafting, development and genuine reality of any MMO to date. In UO you felt you were always at risk of attack and unlike many games you were at risk of losing EVERYTHING you had on you. Pickpocketing, scams and many of the other elements of UO have been dumbed down or even removed in later MMOs, but to me they were part of the gaming world and simply made it more realistic and immersive.
Crafting in UO was time consuming, but getting a Grand Master felt like a real achievement, in the early years people showed off their new swords as a badge of honour and proclaimed loudly who made it, that crafter got more business as it was trendy to own his equipment!
UO exploring has never been equaled.
Customisation of both your skills and appearance has never been even rivaled. No classes, dozens of skills to pick from, make your own class.
Customisation of your home, which is IN THE GAMING WORLD NEXT TO MOBS has never, ever been touched. Yes it made some areas laggy and they did go way over the top in housing terms in later years but it was outstanding that you could actually have your house in an area you picked, on the gaming map. You had to rely on people passing your door to sell your goods! I remember having a house in Vesper forest that had people come over to visit, usually 3-4 people there practicing combat skills, chatting or looking for a passer by to murder.
One thing that I really liked about UO was the fact that there was no spam (expect near Brit bank), comms channels were all local - you had to use your eyes, had to read the text near people - I loved that and still prefer it to the scrolling IRC style chat windows we have in every MMO now, it's just lazy.
To sum up, thread over, the winner is - Ultima Online.