I never got deep into it, but I remember reading magazine articles back in the 90s that that's exactly what the new generation of MUDs were. Wiki has pages on MOO, TinyMUCK, MUSH etc - these are basically platforms where the players themselves can expand out new objects and locations, presumably in a similar way to Second Life or other MMO sandboxes do today.

So the tools already exist, but it seems to me that they primarily appeal to a very specific type of gamer, one that doesn't have much overlap with the type of gamer who would like an "endless" open world or the type of gamer who would like a tightly-plotted narrative experience. I think it's more something that appeals to fans of table-top RPGs, people who are looking for a collaborative storytelling environment.

I think many gamers have the imagination of an epic infinite metaverse style game, but then when they actually get the opportunity to participate in one, it turns out that that's not really what they wanted after all, because it requires a level of creative labor that they weren't expecting. This is why I think the market has naturally segmented into sandbox builders, survival/roguelikes, traditional narrative adventures etc.

My experience was that in practice all that mapped-out world of most social mu*s was largely ignored by players; they'd all end up in a few gathering spots, or in private spaces disconnected from the main map, open only to their owners and people they teleported in.