Games are supposed to be FUN!
I'll argue that games should either be fun or an experience, which I suppose in itself is fun. Does GTA4 have moments where things are really difficult, really fast paced, where you're never quite sure if you're going to survive or not? That can work far better in a realistic setting than a fun setting, and still be fun.
Reading your post more thoroughly, I see you're providing a good example in Witcher.