Hi Liamuk! You won't believe this but I was working on this exact idea all of yesterday and shipped a basic version with proximal audio and a 2D canvas to display players. It's not ready for HN traffic yet, but I joined Online Town and ran into Cyrus.

We had a great ~10 minute video chat in the middle of the street about the possibilities of virtual realms. I've just popped him an email and sent some techno recommendations :).

Good luck with Online Town! I think we'll see a whole spate of similar ideas focusing on a variety of niches.