Well... that will be definitely another long post, i know, but i think it will worth it.
To tell you the truth, Dark, you were one of my hopes, grins.
I know you love rpgs, so do i, and we must do something about that.
Your second alternative sounds really interesting, i didn't think about that, yet. It seems it would be easy to code (at least the movement, and walls...), so i think if we start, we would use the vipgamezone-style, smiles.
Actually, i think it would be more realistic than just a menu, and a short sidescroller.
The map can have different coordinates, like all squares are five steps long, and wide.
About the classes, i found out a little story which is like:
Someone opened the gate to the underworld, and only two men can close it again, those who have a sword of (truth, order, sun, faith, mighty gods, whatever), and a staff of something... These two objects have magical abilities of course, but at first you can't use them, it is like you're a baby and try to step forward, the first try will always fail.
So, as you gain exp, you can have different abilities of the sword, like more hitroll/damroll, ac, etc.
For the staff, well, mages are brutaly good, so i guess it should give you mana regen, and a chaos spell.
So, returning back to the story, two cities sent two fighters to be able to close the gate, and you can choose which's role you want to control...
This story is pretty unbalanced, i know, but that is what gave me a starting point.
About the map again, the only problem is that if we do an rpg, it will always have an end, while on muds that is not always true.
To avoid that, i thought we should use different dificulties, and maybe to end the story, you should complete every difficulty level (kind of like tournament's winning sequence, smile)
Well, thats all for now, just ideas, which if you have, don't hesitate to post (not only Dark empathy, smile).

The idea of the two people needed to complete the end objective is nice. You could essentially split the game into two, with one section for the sword wielder and the other for the mage. Maybe you would need to complete both to win.

Puts me in mind of some mainstream games, like Starcraft, which had multiple acts. You played each race for one act, in a set order... but maybe instead in this you have the option of which to do, unless you want to make one harder than the other.

In any case it makes difficulty balance a lot easier, since you can tailor the segments to the character's abilities.

Just had another thought. Maybe somehow the two people could be fragments of one entity somehow, and you could have a third segment where you play the merged entity of both characters. This way your efforts on building one char won't be wasted.

In mainstream RPG games the ideal situation is semi-randomly generated areas, but I would imagine this is rather too hard to implement.

And don't be afraid to mix two control systems. I never played Last Crusade, but I think a cross between the mentioned grid system on small maps and a mud style system would work. You normaly move mud style, and when combat hits you swap to a map on a grid system. You'd need lots of smaller maps, but it would be easier on system resources than one huge map. The idea of nesting grid maps is nice too, just thought I'd throw this in as well.

Freezing monsters and then shattering them? I've only one thing to say to that: "Subzero wins! Fatality!" 

I deffinately like the idea of three separate acts. Perhaps, one charactor could be male and one female, but closing the portal would almost certainly mean one of them dying so they don't end up taking the final step. then the third act could be playing as their son or daughter 15 years later, who has the talents of both his/her parents for the sword and staff, but because the evil gate has been open for 15 years the land's full of really nasty monsters and lots of things are distroyed.

Anyway, reguarding the monster encounter system, I was thinking something along the lines of how the battles occur in Galaxy Ranger or X hour when you encounter the enemy. So each monster is located on a particular square ---- or possibly everytime you walk over certain squares there's a random chance that a monster will attack, (this would obviously be preferable but it would depend upon programming restraints), but having monsters on specific squares would mean there's no problems with monsters attacking from behind.

Unfortunately, doing a grid system map would involve a bit of 3D sound, but if your movement was limited in the same way it is in Galaxy Ranger to the eight cumpus directions, I'm guessing that the 3D sound wouldn't be quite as much of a pain to code. Such a limited movement wouldn't really effect gameplay if all the other elements were present. Another element you could considder adding is the ability to scan ten squares in any direction and the computer tells you what's there as in X Hour. Monsters could appear on this scan, thus making it possible to detect them early and possibly avoid them by not stepping on their square. This way you could have lots of scannable objects without having to include sound files for them such as chests, pots, walls, and area specific items such as holes in the floor which might lead to hidden areas. Items on the scan could be spoken by a synthesisor (maybe even using sapi applications), which I'm guessing would reduce file size.

Also, it occurs to me that you could have charactors telling you the grid co-ordinates of places to go, the same way that in mainstream Rpg's locations are marked on a world map.

Because of my Pc's arguements with net framework I can't run monti, but from what you say Robjoy, I'm not certain whether the system would be a litle too restrictive. One of the things that is quite often used in Rpg's is having to go back to previous locations --- even in a dungeon setting, something like seeing a locked door when you first go into a dungeon, finding the key somewhere inside and having to retrace your steps to the door.

I don't know about multi-player support Robjoy, but I do suggest that the game engine be created in such a way that it could be reused to make other Rpg games ----, perhaps it could even come with a map editer and the chance to add your own objects and sound files.

I agree about the limitations and unrealistic nature of a menue system, but if it's neccessary to make a game like that I can think of several ways in which it could be made more interesting, such as extra locations, and lots of realistic sounds at the locations.

the spells and experience system, I already have several thoughts on how that might work, but sinse this post is about to undergo crytical mass and turn into a Blackhole I won't put them here.

Well.. Let me explain monty's maps. They are like a side scroller, with the exception that you can go also up and down. NOw, you can say, that then what is the difference between treasure hunt and monty's maps, well, appart from the doors, in monty you are restricted to only one direction. Imagine a maze, and a four-way road. If you go left, then it is not possible to go up and down. It is like walls surrounds you in the other two directions (up and down), so you can go only forward (in this case left), or backwards (right).
I realised again, that if this is not a problem, then it is possible to do several maps, even a map editor, and no 3d sound is needed. Also, with that, it would be possible to make a stereo combat, just you won't have to move, just block, atack, block, move your shield to block arrows, and throwing axes from far, and such
Since probably the game will have two characters, it is possible to make two different maps for the two different characters, so the little quests would be possible, allthough i have no idea yet, how to make this with the map editor.
That is a long way to go, and thank you very much guys for your help. If you have any ideas, please post them.