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I know what emulation means, but is this completely written from the ground up or is it, what?
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Some data was collected from live. Otherwise, written by wonderful coders who enjoy the project.
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Is running your own server the same (for the most part) as running the live server as of that time?
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It's unclear to me what time-frame you're referring to, but;
Currently, the main database project (Project EQ) has done everything up to GoD, with 3 GoD zones not yet complete.
There is also a specific classic project called Project 1999, but that's play only; they haven't released a database to my knowledge, and thus you can't run a server using that. You could run a progression style server using the PEQ system, but PEQ includes many things added after 1999 (such as newbie armor quests with planes of power, gloomingdeep which came with LoY), and you'd have to remove them by hand; but you still wouldn't get quite so clean an experience.
As for Nostalgia, if you run your own server, you're likely to not see huge populations. The most popular servers run 200-600 people, so only the most popular will see 72 person raids, and often that is by doing substantial multi-boxing. P1999 doesn't allow Multiboxing, however, and thus has one of the highest stable player populations.
Good luck, and I hope you find what you're looking for here.