To your first point: Can you link to anything that would back this up besides anecdotes? I'm unconvinced that "I am surrounded by pirates" is more authoritative than the NPD's report.
To your second point: As devinj pointed out, there are a number of private servers that enable playing MMOs without connecting to the servers, albeit with a scale of a few hundred players. A few of them even tweak experience or drop settings for a "more entertaining" experience. In addition, Blizzard was well-known, successful, and loved before World of Warcraft so I'm inclined to lean more towards the notion that there success is because of quality design rather than MMO/DRM implementation.