At Edge Online, N'Gai Croal in his blog discusses some interesting issues relating to realism, verisimilitude, and detail, many of which echo some of my own experiences.
Because even those titles which are widely seen as exemplars of game realism, be they Crysis or Mass Effect or Grand Theft Auto, are themselves stylised in some way. So what is it that we mean when we say that a game is realistic? Are we talking about verisimilitude? Detail? Atmosphere?
I tend to think that of all these, "realism" is actually the least important, followed by detail, atmosphere, and verisimilitude. This is the opposite of the order they are usually discussed (perhaps it's a prejudice against long words).
Realism, especially in a combat game, is the last thing you want. You don't want things to be real, just to seem real, or real enough. The exploits most combat games require of their players in order to "win" are ridiculous by their very nature, even for the super-soldiers those games have as protagonists. The last thing they need on top of that are realistic treatments of weapons, damage, fatigue, and the like.
I think that's a big part of the reason that so many very successful franchises (Halo, Mass Effect) largely operate outside those parameters by operating in the future, where unrealistic situations and damage models can be explained away by advanced technologies-- better shields, better weapons, better vehicles.
It is where realism is misapplied, or rather selectively applied, in games like GTA, where I think there's the most dissonance. Things look and seem like they are happening in the real world, but the perception of verisimilitude recedes as more and more unrealistic things happen, or else the fun turns into frustration when the virtual reality restricts the player's actions.