Can you have events like the "Stormreach Olympics" without enabling people to environmentally interact with each other? Sure you can. With the incredible 3D engine that we use in the game it can even be interesting. It's not why I picked a fantasy role-playing game, however. You could have "the Sims Online Olympics" or any other variation and the contest would be nearly identical.
I find it hard to believe that I have to actually explain everything that they've removed from the true D&D game by PvP-proofing it. It really doesn't have much to do with killing:
1) There is never any uncertainty about who is friend and who is foe. Subterfuge and deception aren't part of the game. Rogues could actually have a place in the game if they were.
2) As mentioned before, all wizard AoE damage spells become much less tricky to wield. While many people probably think this is a good thing, I think that strategy and tactics in gameplay took a serious kick to the groin.
3) Alignments and affiliations don't mean anything. A paladin and an assassin perform the same daily duties.
4) Most importantly, every enemy is a stupid one that doesn't play by the same rules you do.