Setting: Anything, ANYTHING but Westchester/School. Anything at all. I don't care if it's Utopia; I don't care if it's Genosha; I don't care if they're living on Asteroid X and fending off Skrulls all day; the private school in upstate New York is just so, so played out as a setting for X-Sphere MU* play. I'm not even totally against the idea of /a/ school, of there being a component of education and/or training to whatever setting is used, but on the occasions that I've played in the traditional setting, I've found it to be stifling and dragged down somewhat by an overemphasis on the minutiae of school life.
Maybe that's just me, though, I dunno; it's certainly popular enough.
Personally, I would be into using Utopia, or even brainstorming some mystery alternative, if that really doesn't suit.
Canon: I'm super ambivalent about the idea of a canon-cutoff game. It's a useful shortcut towards sidestepping some of the common problem of superhero MU* settings these days by providing the game with an already-fleshed out setting, providing players with a good sense of what important events have or haven't already occurred, and preloading some easy character connections for FCs. I do, however, think that it would be entirely possible - especially in a game with a more limited focus - to construct a suitable setting/overall game framework that both lets people enjoy some of the freedom of adaptation that tends to come with playing on comic games and still maintains a sense of internal consistency if the staff was willing to take care in coming up with a solid foundation and work with the playerbase to ensure that its overall integrity is maintained.
It's not hugely important - to me, at least - whether the precise events of the Phoenix Saga, or Inferno, or X-Cutioner's Song have occurred, or whether the first X-Men were Archangel, Maggott, Cecilia Reyes, Colossus, and Storm; what matters more to me is that whatever setting is run with is consistent and coherent on its own terms.
Scope: The X-Men have quite a few unique(or, at least, recurrent) setting elements, enough that - in combination with what the wider Marvel Universe provides - there's plenty of diverse territory to cover. I personally have found myself drifting towards a preference for combined themes, so that's of course where I would fall, given a choice-- but, given the aforementioned diversity, and the commonality of broadly combined theme games, I think my actual feelings run towards trying to find some middle ground between that preference and a more limited scope by taking some inspiration from M1963+, as well as M3, and any number of other fandom-based games with mixed themes:
Open with 'mutants and associated allies/adversaries only', or even 'X-Men/Brotherhood/whatever else feels appropriate' as the scope, and gradually - via plot, at a deliberately measured pace - expand that scope over time, allowing new FC options to trickle into the pool in a way that - at least, theoretically - allows for some of the variety that seems popular in the circuit these days without running as great of a risk of theme-dilution. Maybe after shutting down a moon-based Master Mold, the X-Men discover the Blue Area, opening the door to tentative negotiations - and/or conflict - with the reclusive nobility hidden within it; maybe Fisk Industries opens a San Francisco subsidiary, drawing a number of costumed mercenaries to the area as the Kingpin sets about trying to tame the underworld of a city actively protected by mutants; maybe ~teenagers from the future begin appearing around town with dire warnings of Kang and/or his adoptive children, whose brutal, timeline-spanning regime began with exploiting San Fran's dormant Celestial. The important thing, ultimately, would be taking care to mold anything from outside of the X-verse to fit the setting, rather than the opposite-- which goes back to the importance of a well-defined and carefully maintained theme.
Alts: The number of possible FCs for an X-Men only game still runs well into the triple digits. They aren't /all/ A-listers, but there's still a healthy enough variety that I'm not convinced of the importance of restricting everyone to a single FC-- though defining a set of 'important' characters that no one person should be playing more than one of would certainly be useful. If it's a matter of forcing focus by limiting the number of alts on a game, well-- people are going to be as focused or unfocused as they're naturally gonna be, no matter what rules this one game has in place to encourage or curb them. There are other MU*s; there's World of Warcraft; there's Netflix; there are a million things that could reduce the amount of overall attention paid to this one game which its admin would have no control over.
That said, of course: I don't think that there needs to be a crazy number of 'em allowed, either. 2, maybe 3 FCs; a laxer number of OCs, though likely not 'unlimited'. I don't have any strong feelings, there. If there were some gradual process of adding to the available character roster, then it could be that - a ways down the line - allowing for more FC slots could be warranted, but absent that, I'm not so sure.
I probably have more thoughts on this specific subject - I definitely have more on the broader subject of concocting a cape game, though I can't really vouch for their coherency ATM - but they aren't coming to me, right now.
