Is Unity3D capable of handling a MMo

For the client, yes.

For the server, I strongly think not, though others may disagree.

You can certainly run mmo-s with unity, though you will need to make sure everything is very optimized, and remember that unity was not designed for mmo-s so there will be some limitations.

We have a tutorial on networking here if you need some help: http://cgcookie.com/unity/2011/12/20/introduction-to-networking-in-unity/

Feel free to let us know if you get stuck at all as it is a difficult process :)

I'm currently struggling to get Unity into MMORPG world both as client and server (in conjunction with uLink). It's sometimes very hard to synchronize everything for many connected player - we'are currently trying to introduce mecanim anim system into mmo and we've succeded. However there are many areas where you can encounter problems with Unity.