It might have been CircleMUD now that I do some research. I remember beastly fido, the janitor, Midgaard, shireiffs, colored stones that if you picked up they negatively impacted your max health or max carrying capacity (they didn't explicitly say they were cursed). Grouping with people for the first time in my life and going into high level places where I would easily die if I were alone.

In 1992 me and 3 other students tried to build a graphical MUD we called Iliad in our professors parallel language called SR for college credit as an advanced special projects class. We never achieved anything playable. I remember Ultima Underworld was released during that time and we were drooling over it.

GemStone was a commercial MUD that I played with the zMUD client (I think, could be confusing this with Achaea). It had a cool experience absorption mechanic. You absorbed experience slower than you received it, and if your short-term experience buffer filled up it overflowed and was wasted. So you had incentive to do things other than fighting. You could be injured (lose an eye, an arm, etc) and need a healer or by from a food vendor a special herbal remedy, it wouldn't just recover on it's own.