The competitive atmosphere was there from the start, it's one of the things that drew me in, and I'm guessing at least some other people as well. People have a tendency to put on role-colored glasses, it could just be that the game was still fresh in your eyes at that time, and the community smaller.
I think I played the mod for about 4 or 5 months with the proximity system so I probably had the time to witness all it could offer, even past the "new is great" feeling. The community was smaller too and that clearly helped making it friendlier, but still. It seems to me people were playing together rather than against each other, or at least more than now. And the mod itself evolved in that direction.
With most of the difference in character levels that existed gone, now the only possible victory is killing/winning. The peasant stage ends very fast, so that people never define survival as a success, rather than killing. Surviving is only satisfactory if it happens to be difficult, which is true when there are level 43 monsters around, and is fun too, just differently. Nowadays, the only success you can ever have is being better than the others at the exact same thing, because everyone plays at the same level.
All this inevitably leads to a more aggressive atmosphere. When as a peasant you are killed by a lvl 43 monster, it's not a big deal, you weren't supposed to survive anyway. It's different when you are always supposed to be more or less able to beat your opponent.
But I've gone through this more than once already so I'll try to stop my rambling here.
Remove the score board, multi and leveling completely and I swear you half to all of the players will quit and never come back. There has to be a kind of competition or its boring. This is not Wendy's Pony Paradise, this is WAR!
Removing leveling completely is a surefire way to scare off everybody
not interested in competitive play, because a good part of those people are interested in the grind (it's not me saying this, it's psychology), and there's almost nothing else in cRPG, except of course the "playing with friends" part, which is present in all multiplayer games anyway. After those people are gone, nobody will come in due to the impossible skill curve when you start a competitive game so much later, and those already playing will probably quit too since there will always be a part of them losing too much for it to be acceptable.
Anyway, the idea of a score trying to measure your whole personal contribution and influencing your income sounds very good to me, because it doesn't give any reason to rage on other players.