...the idea of mounts and such has been thrown out completely. I have an idea on how it could be done that might be possible with istarian engine mechanics.
Use the same feature that is used by costumes which turn your (biped) character into another creature (zombie for instance, or back when they were bugged, hellhound). The 'mount' item when used transforms the character's geometry into a new entity which is the character+the mount as one object.
The character+mount object could be made using already in-game geometry by simply adding the player race geometry to the mount geometry (let's say adding a sslik to a gruok for example) with some slight modifications (posing the sslik to a seated position, adding a saddle to the gruok), and adding the player race's customizable variables to the player race part's geometry (such as armor, colors, etc.). The resulting entity would move, clip, and load as a single object.
As for benefits of having a mount, (other than awesome factor) that's a tricky bit. Super simple would be to just add something about equivalent of road bonus that works off-road (probably overriding normal road bonus). Interesting and unique in an MMO (as far as I'm aware anyway) would be to allow a mounted entity a different movement ability for each type (gruok might run faster overland, giant beetle, while normal speed, might be able to 'hover' over obstacles like up steep rocks). The latter would probably require additional coding however that would cancel out the relative simplification of the idea.
Now I don't know if doing it this way has ever been considered at all, but only obvious complications (to me) that would make it difficult are:
1) the new entities would probably have to be re-rigged and/or reanimated... the 'mount' part could behave normally, but the 'player race' bits would need new animations in order for your sslik-mounted gruok not to look like a sslik mannequin sitting on top of a live gruok. Animations for idle, walking/running, and possibly jumping would likely be all that's needed, but the new entity would have zero emotes unless those were added later.
2) although I think this idea might be simplified, it probably still requires more development resource than our team is willing to commit. Even using existing creatures as mounts (and I think it would be simply awesome to have riding wolves, gruoks, beetles, or cows!) would still require new entities to be made for each combination of player and mount, and even such small modification as adding tack to the creatures in question would still take time and effort that the team just thinks is better spent somewhere else.
As I stated, it's just too bad... the immersion and 'cool factor' that "unneccesary" features like these could add to the game shouldn't be underestimated... we could use every little thing we can get to attract players and keep them immersed.