The problem with turning 2d sprites into 3d objects is that you need some idea as to the "shape" of the object in order to stick a sprite on it.
In UO, all characters are the same shape: They take up a tile and have no specified height. That's it. For example, from the game's perspective, there's no difference between a Crimson Dragon and a Rabbit in terms of how large they are. Some items (stuff you can pick up and move around) have a height property, but that's about it. There's no concept of width/depth other then "this item takes up a tile".
Some old sprite based games (eg Ultima 7, UFO: Enemy Unknown) actually DID have 3d data stored to correspond with the 2d sprites. In these cases it IS theoretically possible to create a 3d view and slap the sprites on as textures.
Case in point.
UO, however, lacks this info. You'd need to create a model for every item in the game to make up for it. Oh, and assuming you could justify the cost of doing so, you'd then need to come up with an interface that compensates for the fact that you wouldn't be able to look past/target past things like you can in the usual client.... Walls for eg.
Edit:
One of the reasons I like certain games is
because of the bugs. Once in U9 I dropped a staff, which promptly fell through the ground, slowly speeding up as it went. For some strange reason I found this hilarious.
You could also, on the other hand, create a stack of items - a sword balanced on it's point with a shield on top, for example - then
climb on top of them. You could get into all sorts of interesting places by messing around with this feature.
Not to mention the skeletons - beat them up and they turned into a pile of seperate "bone" objects that'd re-unite if left alone for a while. Thing was, you could grab 'em all and take 'em with you, to set loose in a town somewhere...
Yes, the crashes were annoying and the story line severely broken. The game was never properly finished before release. But as a result many areas were left in the game with no purpose; you could spend an hour or so progressing through an area filled with puzzles and traps to find nothing at the end of it at all...
Er, that bit's kinda like UO, now that I think about it...