My favorite kind of setting that works remarkably well for RPGs, and games in general, yet is tragically underused is age of exploration type settings. A great example of this would actually be Skies of Arcadia. I slightly less fantastic setting has just as much potential though.
It has all kinds of advantages, the biggest would be that it can easily contain other kinds of settings. In fact, that's the real fun of it, you never know what you'll find next. It can include renaissance countries, older medieval countries, native cultures, pirates, ninjas, wild forests, vast oceans, giant mountains, lush islands, deserts, rain forests, basically everything except modern and sci-fi is fair game. Even those can be squeezed in if you really want, although that kinda thing is hard to pull of without seeming stupid and forced.
I just think it's weird that so few games are willing to give this kind of thing a try. I guess it has to do partly with how cutting edge graphics are just making games smaller, so there's less room for all this kind of stuff, but we really need a game that lets us really explore properly, not just spelunk around a county.
