I like cutscenes when they're fluidly implemented from normal art assets. Neverwinter Nights merely took control of the camera and scripted events with the usual models. Battle for Middle Earth 2 does it slightly different, fading the usual art into something more like painting...but really not that far from the original models.
I'd like to see this done in an MMORPG. Imagine having just triggered or come into contact with a major story event; the camera swings into first-person view, and you watch (the camera turns and zooms as necessary) as a scripted conversation or other situation unfolds before you... something akin to the cutscenes in the Condemned 360 demo. Maybe the artists even have a way of applying a temporary effect to the scene to make the normal models appear more cinematic.
If the game is capable of making your character's face provide expressions, then maybe the camera will swing around in a 3rd-person view to show your character reacting to, or taking place in, the events. Honestly though, I like cinematic story progression mostly when it doesn't employ my character significantly, because I like as complete control as I can get over my character's actions and personality.
Anyway, I've heard about a couple MMOGs having cinematics before, but it didn't sound like they shared the incorporative style of Neverwinter Nights cutscenes.
I'd be particularly interested in seeing a method like this used to bring the audience (player) into the perspective of his or her antagonists at times. I'm still thinking about how best to do that though.