I must be getting really old. Instances are still new and scary to me... I feel like grandpa Simpson, "I used to know what it was, then they changed what it was, now whats it is new and scary to me"
Haha loved that reference :P but yeah, as I said, we pretty much already have instanced content.
Oldschool instance usually
is a private dungeon, for you or your party. Meaning, nothing within the instance, mobs or loot, can be accessed by no one other than you or your party.
What we have is leves, which aren't in a dungeon, but have mobs and loot (those random chests) that can't be accessed by no one other than you and your party. The only difference is that during leves, some random player can run to you and heal or buff you, as you're not locked in a dungeon or anything.
I think I'd actually really like seeing more "open world" instances, some more elaborate leves that aren't just -kill set amount of mobs in 30 minutes-. I'd also find it fun running across a group doing some harder leve/quest/raid boss out in the open like that or some other quest-related actions. You can't really bother them but at least they're not separated from the rest of the playerbase in an artificial way.