I disagree with those who would make the DM mode somehow just a different player mode, like a god mode, or some buff gained in a round robin.
I agree wholeheartedly with Raith and Ayvah and the others who see a D:OS2 GM toolkit as a creative tool. It should be a way to create online adventures in the way a tabletop DM does for the P&P experience.
However, I don't think that we're talking about one tool. We'll really talking about two different tools, because if we P&P folks want a GM tool that does what the P&P DM does, that's really two *different* tasks.
For the pencil and paper DM, the first task is the preparation ahead of time: creating the environment. This creative task involves drawing maps, designing encounters and traps, and developing NPCs stats and personality.
On game night, the DM has the second task. On game night it is the PnP DM's job to make it all come alive, through descriptions of the world, taking on the role of NPCs, administering game mechanics, and making real-time decisions about how NPCs and monsters react to the player's decisions.
So the the ideal D:OS2 GM tool (IGMT?) should permit the DM to accomplish both tasks.
For the first DM task, the creative planning and preparation task, the IGMT would permit environment creation to be swift, yet provide a great deal of depth. Ideally, for as many ways as there are to describe a 10x10 room with two orcs in it, so should there be ways in the IGMT to model it. For planning and prep, the creation tool should allow for a near-infinite way for GMs to realize their creative vision of their game world. The IGMT should intuitive to use, permit the import of customized content, and permit pre-scripting of encounters with NPCs and enemies.
If the planning goes as the GM intends, game night should be almost entirely hands-off for the GM.
On game night itself, the second tool should be an in-game GM mode -- the 'live' version of the prep/planning IGMT. The level of flexibility -- as well as what is technically possible -- here is debatable. IMHO, the GM needs to at least have the "mind control" ability to take over and play any NPC and monster, to provide depth to the NPC experiences as well as intelligent and unpredictable responses to opponents in combat.
As far as how much the GM can change the environment and game state, or the outcomes of the RNG on-the-fly -- well, more flexibility is better, but I am not sure what the technical limitations are. If I decide to suddenly put a waterfall in the game, do players have to wait while the model downloads and updates on their client? It may be that flexibility may come at a cost in immersion and stability, but I might be wrong about that.
The ideal D:OS2 GM tool would allow the computer to do what the computer does well, and permit the human to do what the human does well, allowing a synergy that combines to bring a play experience unmatched by any current game: the richness, variation, unpredictability and depth of a human-mediated game, allied to the accessibility, speed, visual pleasure and ease of a computer run game.