Well here's my experience on the issue:
When Crimson Pirates was the only RP group on the server in FFXI, we followed the storyline pretty much to the letter. Set up events for missions and once those missions were finished we assumed that time had passed, even if you weren't part of the event. If you did the event later, it was OOC and didn't count toward your character growth. This worked for awhile, we were relatively small and didn't bother anyone else on the server with RP, so it was easy for us to take the claim.
The problems started after the Shadowlord storyline. Our guild had just killed the Shadowlord and was heading into the Zilart storyline when more RP groups actually began to appear. Things within our story was contradicting their's - they hadn't killed the Shadowlord yet and in their storyline he still existed. At first we went about this the wrong way - we ignored them and pretended they didn't exist. Their characters existed in some AU that we pretended we couldn't see. We realized later we were limiting ourselves, never interacting with other RP groups and making ourselves completely insular made us look... well snobbish. So we did a lot of retconning for Zilart. Instead of making our characters central to the storyline, we made them around the storyline while giving ourselves our own story (I.E. My character began working for Zilart and became a bad guy, but had her own storyline for this). This ended up working out a lot better as our characters could finally perceive the other roleplayers on the server.
Everytime an expansion came out, however, we did a big storyline to get into that expansion and then said the past expansions were simply past time - which actually worked out as a great compromise. As an expansion occurs whatever happens is absolutely going to effect your character and their motivations.
When we moved to WoW we didn't even try to be a part of the "I KILLED SOANSSO"crowd, but instead had each expansion effect our characters (I.E when The Burning Crusade came out, it was assumed that the storyline for Vanilla WoW was over and done with and we talked about it in character past tense. When Wraith came out, we had our character be part of the big ol' army that was helping defeat Illidan and his ilk, but we personally never saw the guy. As Blood Elves, before Wraith came out, those who spoke out against Prince Kael'thas were considered traitors, while after those who still supported the giant douche were considered insane.)
That is probably how we'll do things in FFXIV as well.
If you want to do the epic game storyline with your characters in the center of it all instead of being effected by it all, I would suggest doing it AU, so you don't end up pissing off the entire community by saying you killed the main badguy.
When Crimson Pirates was the only RP group on the server in FFXI, we followed the storyline pretty much to the letter. Set up events for missions and once those missions were finished we assumed that time had passed, even if you weren't part of the event. If you did the event later, it was OOC and didn't count toward your character growth. This worked for awhile, we were relatively small and didn't bother anyone else on the server with RP, so it was easy for us to take the claim.
The problems started after the Shadowlord storyline. Our guild had just killed the Shadowlord and was heading into the Zilart storyline when more RP groups actually began to appear. Things within our story was contradicting their's - they hadn't killed the Shadowlord yet and in their storyline he still existed. At first we went about this the wrong way - we ignored them and pretended they didn't exist. Their characters existed in some AU that we pretended we couldn't see. We realized later we were limiting ourselves, never interacting with other RP groups and making ourselves completely insular made us look... well snobbish. So we did a lot of retconning for Zilart. Instead of making our characters central to the storyline, we made them around the storyline while giving ourselves our own story (I.E. My character began working for Zilart and became a bad guy, but had her own storyline for this). This ended up working out a lot better as our characters could finally perceive the other roleplayers on the server.
Everytime an expansion came out, however, we did a big storyline to get into that expansion and then said the past expansions were simply past time - which actually worked out as a great compromise. As an expansion occurs whatever happens is absolutely going to effect your character and their motivations.
When we moved to WoW we didn't even try to be a part of the "I KILLED SOANSSO"crowd, but instead had each expansion effect our characters (I.E when The Burning Crusade came out, it was assumed that the storyline for Vanilla WoW was over and done with and we talked about it in character past tense. When Wraith came out, we had our character be part of the big ol' army that was helping defeat Illidan and his ilk, but we personally never saw the guy. As Blood Elves, before Wraith came out, those who spoke out against Prince Kael'thas were considered traitors, while after those who still supported the giant douche were considered insane.)
That is probably how we'll do things in FFXIV as well.
If you want to do the epic game storyline with your characters in the center of it all instead of being effected by it all, I would suggest doing it AU, so you don't end up pissing off the entire community by saying you killed the main badguy.