I think it would be kinda difficult to combine all of this into one game. Especially since I'd like to eliminate the overworld map that M&B has, but you would save a lot of time not having to think about any story at all since it's based upon the M&B and MC.
You'd have to build some sort of simulated overworld map so the game isn't calculating thousands and thousands of NPCs going about their day. If you wanted each NPC to be permanent that would be even harder but it would increase immersion quite a lot if you can encounter an NPC you met 100 hours ago in a completely different part of the world and they'd have some reason to actually be there.
Don't think proc genning a believable world would be that hard seeing as it's been done numerous times in games and in research papers. You'd have to layer the generation something like this; world>resources>borders>settlements>npcs.
Progression in a game like this would be difficult if you go for the tech route, magic would be fine as you could have in-universe reasons that not every farmer can learn how to summon rain etc. If you went the tech route you'd have to somehow propagate the tech throughout the world in a believable timescale based upon where the NPCs travel. But having tech might make the world feel more alive if you can see changes throughout the world as it progresses, building designs changing, weapons and tools getting more advanced etc.
Sort of feels like a never-ending project like DF is and you'd probably need an equally autistic developer like Tarn Adams.
Not to mention the hardware requirements for this would be quite high