The reason I say in person with well known players is that the players would be more understanding than in a MU type environment. Does it have potential in a MU as well? Definately, but personally for my fun:work ratio I'd enjoy running it with pen and paper with 5 other people than for dozens of players, at least at first. Part of the reason is I'd want to balance things with a small group, and secondly because it's easier to manage basic economics with a human instead of code. If someone made a MU like that, though, I'd definately at least look and probably say, "Man, that's cool."

Interestingly enough, even D&D has material requirements for many spells in the technical sense, and I suspect it's still one of the best known 'roleplaying' systems around. I /think/ Asheron's Call worked with components as well. So it's not that it's impossible to implement and succeed.

To go with the 'basic theme' I established a couple posts ago: Common items that are also components are probably relatively inexpensive, since there aren't enough mages to influence demand or supply of said items... but obscure items used in magic may be hard to come by, since there's not much of a market yet, so what can be done is limited. - It could work, but you're going to need players to understand that mages in this type of theme are not combat machines or glass cannons, but more like tradesmen.