To begin with I want to say that I agree with you on the fact that MMOs often require less detailed 3D objects since sceneries are often wider but especially since they might have to bring on screen a lot mor potential characters (on open worlds mostly, the rest is mostly like any standard solo RPG).
However I think you might be confusing several different things, which is what I will call roughly hard computing, graphic computing time, and data computing.
- Hard computing is used to compute everything tied to the core engine of a game, like the physics, the gameplay, etc. The CPU is involved.
- Graphic computing time, the most hungry on a video game of that caliber, concerns everything tied to the visuals (directX, 3D objects, shaders, post process, the graphic engine, etc). The GPU is involved.
- Data computing mostly is about keeping tables of data and keeping tabs on all the info and variables the game might need (like the character info, spatial position, its inventory, whatever). It is totally insignificant in comparison of the rest : nothing involves big calculations of any kind, just a lot of transfers of data and adressing. It mostly involves bandwith.
Now, graphic computing is still 100% done by the client in any MMO, nothing changes compared to any solo game. It's the same. In a MMO it is not the server that calculates what is put on your screen for you, it's your computer.
Hard computing is done on both sides. What is server side mostly concerns the coordination and the processing of... data.
Now then, the amount of data of a solo game is very small. In a MMO of course, it can be quite huge (as all eve players have experienced). What makes the servers "lag" is not the power required to make the graphics run (that is client side), but the sheer processing power to process all the data sent by thousands of players and then send it back to them with the results, and also the bandwith it requires for so many transactions.
It is also a key point in the difference between a client computer and a server. The former has one or two CPUs, and a GPU big enough to display the game. The latter has dozens of CPUs, huge amounts of memory, and a very different base architecture that allows it to process thousands of different things at the same time, this coupled with huge bandwith to send it back to the users, but I don't even know if they have a single graphic processor.
So no, a server does not compute objects and textures, but a lot of data. When too much data has to be processed, then we end up in situations like in Eve when everything becomes a lagfest and the server eventually crashes, overloaded, while our computers are awaiting eagerly for the answers to the requests they sent 10 min ago.
If you lag only because of :graphics: then your computer is to blame. This is why they often try in MMO to use lower quality models to be able to sustain extreme situations, as you say, where hundred of characters have to be displayed at the same time by the client.