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There are a wide variety of styles of Muds, many are based on competition but many are not. It really depends on how the owners of the game want to see it played.
Many games have a somewhat limited amount of content so the Staff does not want to see someone fly thorough it all too fast and then get bored and quit. Others want to see each player compete equally with everyone else and they feel that multiplay gets in the way of that.
Personally I make games so that players can come in and and much as possible play in a way that makes them happy. It is the same sort of issue with things like Bots. Many games make them illegal as well, I do not. If it makes someone happy to have some code run their character and they enjoy that, fine with me. The line for me is hit when what one player does somehow ruins the fun for others.
There is a lot of ego tied up in most games. For many people it is the only time in their life that they are totally in control of something and quite often it goes to their heads. But on the flip side there are also plenty of games run by people who want to see their players enjoy themselves and who put a lot of time and effort into making a game that is fun to play.
For me I see people with real RP skills as a rare thing, and if someone like that wants to play more than one character I am more than happy to allow them to do so.
The real problem that can happen with multiplay is when someone uses a secondary character to do things which violate the spirit of the game. As you mentioned many games have factions, Clans, or some other kind of grouping. If your main character is a member of one group and you make a second character simply to inflitrate a rival group and sabotage them it tends to cause hurt feelings.
When a player(s) get their feeling hurt in this way they have a tendency to quit playing. Because of this potential most games prohibit multiplay. So like many things in life, a few dishonest people ruin it for everyone.
A.T
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