I'd like to see an option to hide the prims of unattached objects that are between the camera and the avatar when the camera is focussed on your own avatar (that is, normal view or when focussed on your own avatar with alt-click). Many, if not most, other third-person games seem to work this way, so that when you're inside a building you don't have to choose between an obscured view or having the camera zoomed in tight against the character.
It seems to me that the client has all the information it needs to do this, the server shouldn't need to be aware of it. The implementation should probably try to avoid hiding the whole of an object, and it definitely shouldn't hide avatars, objects an avatar is sitting on, or attachments.
Ideally it should work at the prim level, so entire linked houses don't vanish from view, but if that's not possible then the objects should probably be ghosted to 30% transparency rather than completely hidden.
The biggest advantage would be to remove the claustrophobic nature of natural and realistic building. Right now you have to build rooms overscale to avoid having the camera crushed against you when you enter them, and moving through vegetation is tricky at best.
The implementation need not be pixel-accurate. Simple ray-intersection calculations against bounding boxes or spheres for each prim would be more than close enough.