If you haven't already checked it out, I'd suggest having a look at the Torque 3D
platform by Garage Games. Note, however, that it's _not_ free!
Still, Garage Games is well known for it and for its support of the Indie game dev community.
You'll find their demo of the Professional version available for download here
(note: direct download link).
I haven't used it myself so I really can't offer technical insight regarding actual performance and range of abilities, though there are examples of games created with it from just about every genre.
Add-ons like Genre Kits (3D Isometric, RTS, etc), tools (landscape rendering, team management, etc), art packs, exist for purchase as well...
To give you a little extra hand with your assessment (the "what can be done with it" question) I've browsed games made/in the making with Torque 3D and picked a few relevant screenshots for easy perusing:
Penny Arcade Adventures [Action/Adventure RPG] screenshot
Frontline Nation [TB, Tactical/Strategy] screenshot1
Legends [Action/Adventure FPS] screenshot
Age of Decadence [TB RPG] screenshot
NASA's Distributed Observer Network simulation (collaboration with Valador) screenshot
Dreamlords [MMO RTS] screenshot
Cyberwing [RTS] screenshot
Some of the games made are currently on sale via Steam (one or two rather widely known). They also have high-profile licensees like Ubisoft, Bioware, EA, etc.
I hope this helps, Veteran.