Level-based design in MMOs is expensive, wasteful, broken and ultimately self-defeating.
WoW is successful despite the levels in the same way that EQ was successful despite the casual-hostile, cat-ass-y grind quotient.
Making the leveling process more interesting was never going to pan out.
MMOs are simply not about what happens on the way up.
In my experience most MMOs don't follow the same reductions in force after launch.
WoW didn't, Rift didn't, heck I can't remember even the old ones, DAoC, CoX, or way back Verant/989 studios doing it with EQ or EA ditching a bunch of UO people after the release. They don't do it because they roll those folks over to sustainment and expansion plans. It takes pretty big teams to work on a decent expansion and they need more in the way of sustainment than most other MMOs of recent days in order to keep up (or catch up, even) with the Jones'. On the other hand SWTOR was supposedly bloated beyond belief.
I also don't believe these are all QA people. Bioware traditionally didn't keep a lot of QA on staff (maybe half a dozen) relying on their publisher QA to do the lion's share of the work. They might have changed that with the MMO but it wouldn't surprise me of the QA people were EA's and slushed to other projects after launch.
Maybe I'm remembering wrong or it just wasn't as publicized back then. Could we be more in the know today? That still doesn't explain WoW or Rift not laying people off. But they also weren't abject failures.
EDIT: I like level based design. I guess I'm too attached to my D&D roots. I did like having more freedom in later D&D editions and I also can enjoy other leveling systems but at the end of the day I want some metric that tells me "do this up until this point and you will get rewarded". Even UO was arguably "level based" since you knew what you had to do to reach grandmaster in any of the skills. You could even delevel by letting your skills atrophy.
As for KOTOR 3. I don't have any doubt a real sequel is coming, it will be online-only, and will use the SWTOR version of the hero engine just as that extra bit of salt in the wound.
I got scared in college in the mid 90s when a really dorky fat lesbian nerd in my dorm would rave about "Multi User Dungeons" and "Multi User Shared Hallucinations". Grandfathers of MMOs. And it is then that I realized that I never wanted to be like that sad person, so I've never really tried playing an MMO.
Yet you play Skylanders. A game in which you buy toys with built in keys that unlock content in the game that was there...but locked. Isn't that as bad as MMO's? Actually...no it isn't.
Actually, it's pretty damn awesome. And the console versions have no online mode whatsoever, and no DLC whatsoever. (The content is on the disc but locked until you have the figurine, as you say.) It is a very isolated, solo experience, just how I like it. But you do have the option to have ONE player locally play with you.
The web browser version is sort of an MMO, but one in which no one can talk to each other except with canned, prebuilt responses. It's impossible not to be nice to people that way. The social aspect is almost non-existant.