Well, it would lose some of the epic-ness being set in one place. But then, what makes something epic?
The only thing that I can think of that comes close to what I'm thinking of is Undermountain. In theory, you could run an entire campaign in Undermountain.
I think there are lots of possible reasons why a characters wouldn't leave. They either can't leave, or all of their objectives need to be accomplished in one place, or probably both.
The only thing that really appeals to me in a strongly localized campaing, is the amount of depth you could have. Something that world-traveling often lacks.
The castle siege idea actually has some merit. Just don't deal with mass combat, because it is boring and not very RPGish. Dealing with the small encounter that happen during a siege is more interesting and easier to roleplay. Throw in things like traitors, spies, secret rooms, divine visitations, dimensional rifts, time-travel, and the like...