As I've observed previously, I don't accept the assumption (and that's all it is so far) that players only like character advancement games. Maybe it is true, but how do we know? Where are the alternative games that would give us some evidence as to whether this assumption is correct or not?
In fact, I think there are reasons to believe that character advancement games have some innate flaws, and thus that alternatives could prove to be fun, too.
Designing a game to have character advancement automatically means that players spend the first part of their in-game lives levelling up just so they can get to the end game which, theoretically, is where the real fun of a game is. Instead of playing the fun part of the game, players spend weeks or months training to get to the fun. Instead of implementing the fun content, developers spend weeks and months implementing character advancement content that players feel they have to grind through.
Why do we accept this state of affairs as "what players really want?"
Here's a concept I've been working on. Let players choose from among a large number of skills when they create their character... and that's it. When you're done creating your character, you're ready to play the game. No leveling, no grinding, no "low-level" content -- it's all end game from the moment you exit character creation.
This does not imply that "everyone can do everything." Because there are skills, because different skills favor different gameplay styles and thus appeal to different kinds of players, and because not everyone will choose the same skills, some characters will be better than others at performing certain tasks. A character with a lot of combat skills won't be as good at building houses as a character with crafting skills; a crafter won't be as good at making money as a character who learned financial skills; and so on.
Furthermore, content doesn't have to be graded by level. It can also vary according to how hard it is to reach through travel, or by how many players (and how many unique skills) are typically needed to complete that content. Again, a game without character advancement does not imply that every character can take on all content. It just means you don't have to spend time trying to open up the content that's already been designed for you.
Not having skill-based character advancement also doesn't mean it's impossible to improve a character over time. For combat players, there are all kinds of rewards that don't vastly increase the power of veteran players over new players: perks like rank, badges, leader boards. For the other type of competitive player -- economic players -- there's the other big form of improvement: money. Even if there aren't crazy things to buy, players will still collect money as a form of keeping score.
Finally, it's possible to have skill advancement even in a non-advancement game... but the only way to make this work is if each improvement comes with additional responsibility for helping other players have fun. When the rewards for collecting XP are nothing but more power (as in current character advancement games), everybody goes for advancement. When a reward is all benefit and no cost, everyone will try to take that benefit. Why not? Except that this leads to a game full of cookie-cutter characters.
Instead, I believe every reward should come with strings attached. In particular, advancing in some level such as rank should impose new and larger responsibilities. This means treating tactical gameplay as distinct from operational gameplay, and operational gameplay as different from strategic gameplay. Each higher level should require more abstract thinking and more time spent coordinating the gameplay of other players instead of just being concerned with one's own immediate gratification.
This requires one additional feature: players must be free to choose not to advance. If you like pedal-to-the-metal, full-tilt-boogie combat action, there's no reason why a game should force you to stop playing at that tactical level game just because you "have to" advance in level. If you're willing to take on the logistical and long-range planning headaches that go with strategic-level gameplay, then you're free to advance to seek those challenges, but if you like being a sergeant, you ought to be able to stay a sergeant.
In summary, yes, character advancement is a familiar model, and players do like to feel that their characters are becoming more powerful. But character advancement also imposes some effects that aren't much fun, like having to spend weeks grinding to level up before you can start enjoying the deepest content. On balance, I believe a game that lets you create a complete character has at least an equal chance of success as character advancement games, and I look forward to some enterprising developer giving this idea a shot.