I agree that it's immersion breaking to be inside a building, say off the merchant square in Cyseal, and hear the merchants prattle on as though you were still out there in the thick of the square--but you are inside and attempting a dialog with someone else also inside the building with you.
The situation very much calls for occlusion, eh? When you enter a dwelling within hearing proximity of the loud street hawkers, it's OK if you hear them if it's occluded and at quarter-volume. The presence of the inside walls should serve to muffle the sound. Audio occlusion is something routinely done in games for years. I have to agree with the assessment that it should be done in the EE when needed.
