Quick: Which game is more realistic? Super Mario Bros. or Call of Duty 4?
Obvious answer?
Yes, while COD4 is perhaps the most realistic looking game in recent history, you cannot help but notice the parts of the game that are clearly not realistic enough, like if a character shakes his head in slightly the wrong way, or if a fallen enemy suddenly disappears. These minor imperfections actually take away from the immersiveness of the game much more than a minor imperfection in a cartoony game such as Mario.
The lesson here is this: If you try to be perfect, and your customers expect you to be, you are setting yourself up for failure.
This is why Google still uses cartoony, almost juvenile, colors in all their apps. They don't try to make Gmail look like your desk (nor like Outlook). Remember graphical email stationery? Never quite took off did it?
Compare this to Office Live. They try to make web apps look like desktop apps, which is the wrong thing to do. Yes, it makes sense to start by modeling those apps after their obvious desktop counterparts (e.g. Google spreadsheets does look like a spreadsheet), but it is silly to pretend that they will work like one.
Early on-screen readers tried to look like real magazines and books, with page-turn animations. That didn't last very long. People understand the concept of metaphors, but if you try to make a metaphor too realistic, you end up destroying the metaphor itself.