There is a new MMO coming out very shortly called Rifts. It is vaguely like the king of MMOs, WOW, in that it has a fantasy setting and many of the controls and interface elements are the same. As usually happens when a good looking new game comes out people talk about how it compares to WOW and end up saying really ridiculous things. In particular I have seen people talking about how Rifts doesn't have the reputation and gear grinds that WOW does and generally they are very happy about that. I think this comes from a fundamental misunderstanding of what grinds are and how they are useful.
Essentially what it comes down to is an MMO has to provide many challenges for players on an ongoing basis. Those challenges can be extremely trivial or brutally difficult or any place in between. There are constraints, of course, in that if everything is trivial players get very bored, accomplishments are meaningless and anyone who is skilled and persistent will easily complete every single challenge the game has in short order. This may well be fun for awhile but it will not lead to people continuing to play and that is failure for an MMO. If everything is very hard then players will have to practice constantly on everything and play over and over to learn how to beat each challenge. Again, this will be a huge problem for subscriber numbers because there are huge numbers of players who want to log on for a short time and do something useful and interesting - if everything requires a ton of practice and skill they can accomplish nothing if they log on for only an hour and they will quit. Given these extremes it is clear the best route is a mix of trivial, medium and challenging tasks. This allows players with little time to do something, and in particular to choose a challenge based on their mood. It also means that no matter how skilled a player is (or isn't!) they can find something that pushes their limits.
Great, so we need a mix of difficulties. However, here is another stumbling block: It is very hard to design very challenging tasks. Testing and tweaking and debugging really hard things is very finicky and good players will beat tasks drastically more quickly than they can be designed. If it takes developers a month to design a single challenge like a dungeon and good players take 3 hours to beat it then what exactly do the players do while waiting for the next challenge? The answer of course is incremental improvements. WOW certainly does this, though it by no means discovered it. Doing a dungeon over and over allows a character to get more gear from the dungeon, get more reputation with a faction and get points towards even better gear. This means that running the same challenge over and over, well beyond the point where it was actually hard, becomes useful to the player and keeps them interested. This has a couple of effects, firstly it means that trivial content can actually be used to keep players busy and secondly that players will feel a consistent sense of accomplishment when they use these incremental advantages to defeat challenges that were previously beyond their skill. Giving players incremental advantages for repeating challenges, even when those challenges are extremely easy, keeps people busy, keeps the community full, and gives people who enjoy the game a feeling of accomplishment. This keeps subscriber numbers up. Letting players slowly improve their power through easy tasks and thus overcome greater and greater challenges gives them something to look forward to. They will not have to face the fact that they have reached the limit of their skill and can go no further; just a little more work and preparation and a new challenge will be defeated.
So if an MMO wanted to eliminate the 'grind' they would have to completely remove the incremental benefits of doing things more than once. If you give people benefits for doing things over and over they will do them and that then complain about the 'grind' that is mandatory. However, any MMO that does this will have to face down the problems outlined above: Players will run out of things to do extremely quickly, having beaten every challenge, and players will run into brick walls, challenges they simply cannot defeat. Both of these things are disastrous for a business model that keeps people playing and paying for years at a stretch. Much as people whine about the grind I don't think they really understand why it is there and why it is necessary for this type of game. I should note that it is entirely possible to build a MMO without a grind at all, but it almost certainly has to be a purely pvp game. The sort of game that most MMOs are, which focus on challenges for characters from the game engine rather than other players simply has to have some kind of grind to keep the players playing.