I think there should be a lengthy World History, avilable on various books as done in Morrowind and other games. The accomplishments of the player in Arcanum I should be mentioned in it too. A world history would make it feel more like you're playing in a real world that has a past.. Seems I'm a shortsword already..
Very nice idea indeed Implementing history books concerning what your character did in the original Arcanum wouldn't be done though. It wouldn't be impossible, but it would take an outrageous amount of time to do, considering that they would have to make like 30 versions of each history book, since you had quite many options on solving quests/interacting with NPC:s in the original Arcanum as it was.
It's a mammoth task anyway, if you want to make it interesting, involved, and not sound cheesy. It's possible in the Realms because there's so many people setting things in the same existence, there's a lot of work put into it. And Tolkien dedicated his whole life to doing this If you try to hard to do this you can only hope to come up as a half arsed version of him. But they should give it a blast anyway. They're men of taste, they'll pull it off.
Well, I doubt that they'll allow you to convert your Arcanum character to Arcanum 2. I mean, it would be difficult to create a compelling story in a world which your character joined the final enemy. I just see it now, Caladon's ruins and Tarant's ruins get in a decomposition race. Which side will you join....... Seriously, I prefer the history system already in Arcanum: learning from the NPCs about Lorek the Abjurer, the Bane of Kree, and others and leave the library books for further establishing the present situation.