I would vote yes for collision detection. Do it like they did back in Warhammer Online. If I remember it correctly, enemies cannot move through you at all, while friendlies move through at a reduced speed.

I do have some rather fond memories of Warhammer Online's Keep Sieges where the collision detection was integral. Whenever the keep gates were destroyed, we'd form a shieldwall in the doorway, and it felt very highly epic. It opens up a whole new level of tactical play in group combat, which, as I understand it, is the main focus of Cyrodil PvP. Speaking for myself, I would be rather disappointed if it didn't make it into the game.

No. It's really not necessary. I find it adds to lag, causes pinch points you can't get through etc etc. There are many great games that have been well and truly viable without it.