To be clear, if you're asking about creating various instances to appropriately reflect different quest outcomes, I'm not entirely sure. To be honest. I vaguely remember it being mentioned years ago, during a telethon, and an explanation along the lines that it would be difficult to implement due to player housing. However, if you're asking about a story and quest system where a player's actions have consequences and those consequences would in turn affect the world; then yes, they stated how this would be an integral feature in the game. As you mentioned, LB has stated this multiple times and it clearly has never come to fruition. While I agree that I don't think they were/are lying, I do believe they drastically overstated the games capabilities in this respect.