I am currently working on my entry to the 16Kb MUD Competition. My final entry will appear here, along with a description of what it does and why when the competition closes.
So far my entry consists of 5 locations, 1 mobile and 2 objects. There is primitive combat code, and the ability to pick up objects (and use them if they are weapons). Source code size stands at about 12kb, although this can probably be reduced by another round of optimisation! The biggest problem currently is allowing for a reasonable amount of initial locations and objects (whether this is by creating them within the source code, or including them as a separate data file).
Whilst it is unlikely that any of the entries will provide the basis for any major new developments as they stand, further development of the code (possibly by the original authors), could be very interesting.
The competition is now closed. You can find the source code to my entry here, as well as an archived version.