It was my opinion that every MMO has grinding, all content revolves about it. What makes the difference is perception. Some find it fun and don't consider it a grind, others don't and see it as tedious. Grinding is not so much the problem as whether or not it will be considered as fun to do.
Grinding takes the place of content in a lot of cases. If you didn't have grinding in games, whether World of Warcraft, Diablo III, or yes, even UO, people would blow right through the content in no time flat, and be left with nothing to do.
Look at early RPGs, including Ulitma VII - if you actually looked at the amount of time spent completing them, they aren't that long really. The difference is that you are all over the place, interacting with all kinds of NPCs, etc. and not spending hours doing the same thing over and over in the same locations.
There is a huge amount of difference between 4 hours of specifically grinding away at something, and 4 hours spent wandering around and fighting random mobs as you go and just exploring. It takes a lot longer for a development team to come up with content for the latter. Like somebody else said, grinding is easy to do. Blizzard has like 4,000 people working on Warcraft, probably hundreds of designers, but at the end of the day Warcraft is a grinding theme park, because even with all of their thousands of people working on Warcraft, it's much cheaper and easier to put people on the roller coaster and have them doing basically the same thing over and over, even if the scenery changes a bit, than it is to truly create a full sandbox. It's also a lot hard to screw up.
It's why UO, Darkfall, and EVE Online, and even Star Wars Galaxies (prior to CU), stand alone - companies do not want to do sandbox MMORPGs, because it's expensive and it's easy to lose players. Those games, besides being sandboxes, never managed to crack the half million subscribers mark, even though three of them had a headstart on Warcraft (although EVE Online is moving towards the half million mark slowly but surely). Sony completely botched SWG
leading to its premature death. Darkfall has had its ups and downs, UO has a fraction of the players it once had and there doesn't seem to be any long-term plans for it outside of a grpahics update, and while EVE Online is doing well and just hit 400,000 subscribers, they are having to watch their step since they've had some recent missteps.
UO is slowly moving towards the grinding theme park - you could argue that the champ spawns are basically that, since many times it's the same people doing them over and over to get the stuff to sell to others. I think sometimes we don't notice it as much because UO has been all over the place - several different dev teams, the Pub 16 and AOS changes, and because of the longevity. And we've just come to accept it.