I've been contemplating that for a future game (not an RPG, a kind of action beat-em-up... but the same idea applies) the idea I came up with (which has in no way been tested or anything) is to make a basic model of a character, featureless... like a manuecquinn. My game is fortunate in that in all the characters have the exact same basic shape... perhaps for an RPG you'd need a base model for male/female elf/human/ork whatever.
The hair, clothes, weapons, shields, and all other extensions that make the characters unique could just be objects glued onto the base model as needed. You'd need a few varieties of textures for the base model too of course... that would allow for much, much customisation.
Could work... in theory