As a newbie to the forums, I'll introduce myself as someone who is a massive fan of D:OS and a backer of D:OS2... I hope you like my suggestions.

I really see the GM mode -- as many others here have described it -- as an enhanced version of P&P RPGS like D&D.

I'm personally not very interested with the idea of persistent worlds, or deep modding of monsters, skills (ie custom skills), etc. I feel that these are pretty cool ideas, but entirely unrelated to the idea of a "GM mode". That said, it'd be awesome to be able to include any modded items, skills, NPCs, creatures, etc that are created by the modding community while in GM mode. However, for the most part I think the mechanics built into D:OS2 will be plenty versatile.

I feel the key focus of the GM mode is to be able to create a story in as close to real-time as possible. I like the idea of controlling enemies in a battle, but for the most part I'd prefer to trust the AI and move elsewhere to ensure the next part is prepared. I'm sure the AI for D:OS2 will be be pretty cool.

Essentially, I feel that GMs should be able to drop-in and drop-out of combat -- either letting the AI control it or not. By the same token, I feel that the GM should be able to drop-in and drop-out of NPC dialogue. Even if a dialogue has been pre-made, he should be able to intervene at any stage. Also, maybe half way through combat one of the enemies wants to beg for his life, or offer the player a chance to surrender?

Anyway, the whole point of having a GM in a P&P game is that a GM is able to react intelligently and dynamically to the players. This is different from just playing a board game where the rules are clearly set, and everyone is restricted enough so that their actions all have clear and explicit effects. In P&P, it's hard to predict EVERY single possible scenario beforehand, but with enough preparation and creativity it's possible to react quickly.

We already have the suggestion about Procedural Generation. I couldn't find this explained in this thread, but my understanding is that this is a tool to help with quickly building maps in a pseudorandom way. In my experience, some of the Heroes of Might & Magic games had good "random map" generators, where you could set a few conditions, and it would generate a playable map. I wouldn't have to agonise over every little detail (am I giving this player too much stuff?), and so I could invest more time on the "big picture" of designing what I wanted to design. It would be awesome to have the ability to use this kind of tool to generate entire maps, maybe making a forest, and then decide to place a generated town of a friendly faction, maybe place a town of an unfriendly faction (eg orcs) somewhere else -- with a suite of minor NPCs already included. Hopefully, I could choose the size of the town, generate a building to drop in somewhere, and then add a few NPCs.

This actually leads into another idea I have:
Territories and Factions As part of planning the story, I would need to think about the politics. An example of factions in D:OS is the orcs (faction) who are fighting with Cyseal (faction). Immaculates would be yet another faction.

But factions wouldn't only be limited to only cover sentient creatures. For example, if there is a scary forest full of giant spiders, you could create a faction of giant spiders, set the kinds of creatures that fall within that faction, and then zone the forest as the territory of faction of giant spiders, and can generate spider encounters within that territory.

The factions would help to determine how the AI would react when an a Cyseal soldier meets an orc, or when an orc meets a giant spider.

So I would like to be able to design factions and map out territories. Ideally, I would be able to design what kinds of NPCs/creatures typically fit within that faction, what kinds of classes and equipment they would tend to have, what kind of "towns" they inhabit (eg the style of a human town is very different from a bandit camp which is very different from an orc town) and how they would react to other factions.

This is the main kind of modding I'd be keen for in a GM mode.

Further to the earlier idea that the GM should have freedom of movement, and be able to let the AI handle itself sometimes, I also feel that we should be able to keep track of the players while we're distracted on other things. We wouldn't want the entire party to be wiped out simply because we're not constantly watching them, or for them to do something stupid like attacking a guard in a town, where suddenly the AI doesn't know how to react. There should be some kind of Player Tracking. Possibly some kind of a split screen?

Finally, the GM needs to be able to quickly Pause the Entire Game -- even if the players can't -- for those times when he really needs a minute to get things ready.