when UO was created, it was the first. so things werent done according to what we know now is the best for mmorpgs.
Personally, i dont like the "on off" scenerio. its very frustrating when you can be attacked, but someone hogging resources or an area can just turn off the tag and be invulnerable. That being said, its better than nothing, and some people enjoy it.
Ideally, UO would have done very well if set up like WOW servers. (i realize wow has the 2 factions, but the same priciples would have worked for UO)
PVP Server (anyone open to full pvp)
Non-pvp server (pvm only. players cant be attacked by other players)
RP (pvm only with naming and behavioral rules more suited towards those focused on RP)
RP PVP (pvp via toggle / flagging, with additional naming and behavioral rules)
The "RP PVP" servers are the ones being suggested in this thread, where you can toggle your pvp. Its kinda frustrating, but like i said better than nothing. When i played wow i played on a full pvp server, but had one character on a server with some old UO friends who chose the RP PVP toggle server. it was ok, but very awkward and frustrating at times. like, you can experience the fun of pvp, but nothing can really be accomplished by it. because if someone really wants to be an area (like for UO that would be champ spawn, peerless, whatever) they can just turn off the toggle.
The tram / fel split was in my mind, and in the devs hindsite (according to interviews) a horrible way to address the problem of those who wanted a more casual gaming experience.
It would have been far better, and many more players would have been retained over the years if the split were done by server, not by facet. and this would have had to been down from the start, or with free transfers. having to "start over" and go to siege just wasnt realistic for many people. and overall the games progress was geared towards insurance, items, and tram. not towards pvp, so thats another issue.
for UO specifically, i would also make one or two more server types that would adress the issues of insurance.