As I said, the game model changes things. One of the main issues in these discussions is that no one posts what they’re actually imagining of the MMO to be doing — and we end up talking past each other.
Anyways, with an FPS or Action RPG (anything where you can act/react quickly, then you expect your peers to do the same) low state/latency is absolutely vital.
With WoW style games you could probably get away with a LOT of interpolation before it becomes a problem (it’ll quickly become obvious as people get unnaturally tweened across the screen in straight lines, but that’s ok) largely because there’s really not much for you to be doing off-cool down anyways.
The main problem is that like RuneScape/Maplestory, in WoW supporting 200 players in the same spot doesn’t really do you anything (except for those group fights, where latency becomes important again) — towns are just glorified chat rooms, because what else are you going to do? You’re not pikmin requiring x/200 to proceed
VR chat it literally accepts that chat room aspect, and so it’s more than acceptable — it’s part of the fun
That is, you can change the gameplay to better support the issues relating to large groups. The bigger problem really is do you even want 20000 people in the same session? There’s not much to do in a crowd — in a real-world crowd you basically lose all autonomy and the crowd itself becomes the unit of autonomy with “a mind of its own”. Ultimately it’s a dumb goal to have in a non-competitive setting.
What you really want is 20000 people able to affect and manipulate the same “world” — the way we do in reality. We don’t look for everyone being there in front of you — we realize things have been changed by other people when we weren’t looking. You want object persistence and manipulation with a consistent world state, shared by thousands. Which is a much different problem — you want, really, a proper simulation.