I've never been really fond of the Karma system-that brings up the very question of morality. And although most can agree on some VERY basic ideas-like "killing is wrong"-there then is the matter of, "Is killing wrong no matter the reasons behind it?" It's too much based on personal opinion, and can easily make things too black and white, in my view.
The reputation system, on the other hand, I love-at least the very concept, if nothing else. Having interactions toward a character differ based on their actions toward factions/groups is awesome. It's a lot better than what worked for factions/groups in Fallout 3, in which if you acted in a harmful way toward a town, maybe even participating in a massacre, they'd seem to have obtained absolute amnesia about the event a few days later. There's no real consequence in that, which just svcks.
In either case, I was just wondering-I wouldn't even know if it's possible. I'm no game engineering expert in any way, and I don't really know the limits and abilities a MMO would have in comparison to a PC or console game.