The points have pretty much been made by KM, but here it goes...
1) Yes, from 1-20 the D&D system isn't granular enough for a CRPG. The D&D exp progression is based on 14 or so encounters which is quite simply easy to whip through and even single player CRPGs based on third edition have had to adjust for that. The experience point and leveling mechanics have to be rewritten. I've run into suggestions that it's no big deal if people don't level often and gamers should enjoy the journey, not the destination. Guys, if you don't level what ends up happening is that loot turns into your leveling mechanic. This even happened in 1e and 2e, but it got dismissed as "munchkin" or "Monty Haul" (after the game show host Monte Hall) gaming. However that didn't make the problem go away. When you restrict leveling, gold and magic items take the place of levels.
2) Solo play is necessary for an MMORPG. You have to allow people to log in and play the game for an hour. Forming a group is not easy and even games that are friendly to solo play strive to make it easier. How would you feel if you only had a short time to play and the only cleric you could find was a jerk and a spaz? The strength an MMORPG has of having so many people playing at once to create a world is also a weakness. There's a lot of people I'd rather not game with out there.
And D&D does not do solo play well. Period. The rock-paper-scissors concept behind class balance works great when you have a team to back you up with different strengths and weaknesses. It blows if you're the only guy out there. NWN had custom generated dungeons that were built around the character's class and level, but computer generated content is going to be a little stale and generic by nature.
3) One of the things I think was great about the development of 3e was that the game was balance around five encounters or what a typical group might reasonably expect to do in a typical game session. The rest model was adapted for D&D online and again: kudos to the designers. But for an open ended game it puts the kibosh on random outdoor encounters and restricts players to dungeons.
4) And boring outdoor travel is just as well. The D&D travel spells and concealment spells would have to be reworked (see KM's point that if you're going to do all this re-engineering why not just use an original ruleset). 1 minute of invisibility is a long time in an MMORPG. The monk speed bonus is awesome. Flight is awesome. Horses -- I'm not making this up folks -- are awesome. Being able to double your movement speed is great and if you've only played pen and paper you really can't appreciate what I'm talking about because this kind of thing is abstracted for you. In an MMORPG you have to travel every step of the way. On the positive side, that's good immersion. On the negative side, walking is dang boring. Which is why there are random outdoor encounters and quests ... which remember we can't have because we never know when the PCs are going to rest.
5) The craft skill system in D&D, quite frankly, barely cuts it for pen and paper gaming. This limits player activity to killing monsters and player-versus-player combat.
6) The D&D economy is very linear. Even in a high roleplay, open ended D&D game the economy is still based on the PCs going through adventures once and only once. Nothing is really repeatable and that assumption must exist in an MMORPG. How many Hands of Vecna or Blue Crystal Staffs do you want in the game? One? And the first guy who gets it is the only one who could ever have it? This is to say nothing of gold. Honestly, I have a hard time seeing how a D&D MMORPG could prevent 3rd level guys from having +4 swords after the game server had been up for awhile. Or, on the other extreme, having gold be all but worthless. The linear D&D economy all but mandates one of those two directions.
What I like about D&D is that I have a game that's all about me and my buddies. What I like about MMORPGs is that I can arbitrarily play from 9:37 to 11:04 on a Tuesday night. These are very different gaming needs and they require very different games.