I firmly believe thats a trade a good majority of the community would take.
At the same time, I think if Blizzard wanted to do a long term investment they could hire additional artist/concept designers to make it work out. I know people hate in game stores, but this type of stuff would be incredibly easy (imo) to capitalize on.
I also don’t think housing means raid tiers wouldnt exist, and again even if it did it would be well worth it.
Im not partial to ONLY guild housing, but if thats what it is and you can buy rooms, furniture, etc. and decorate with your guild? Sign me up!
Judging by how content is used, abused, and thrown out this is definitely a legitmate fear.
Feel like this can alleviate your fears some. Players like to cry WoW is dead to any who would listen, but what if housing could revitalize the world some?
Put some materials all throughout the world that players would have to gather for crafting certain furniture. Maybe if you want a certain lamp you need special aquatic materials from Vashjir, perhaps a certain table requires tusks from the grey items you get from hellfire boars, there could be furs you need from the Furbolgs in Northrend.
Whatever the case, I think there are certainly ways to add a myriad of things into WoW just from player housing that would engage the World a lot more if they want certain pieces from their houses. Professions could see MAJOR upgrades as well, Tailoring makes sheets, Jewelcrafting essentially bejewels, Leatherworking for Rugs, you get the picture. Maybe there are new NPCs scattered around the world you can learn patterns from or some new quests to figure out how to use strange materials.
I know it is a TON of work for Blizzard, but I do believe its one of the next major things that can put a lot back into the game, even if you don’t necessarily like the housing aspect and are afraid of the instancing, housing can put people back in the world even if the end goal is to make a house to show off to friends/family.