Well, the thing is that some of the Western games mentioned aren't really RPGs. Bioshock for example is a shooter. Fable and Mass Effect are "Action RPGs". The genere being differant and having differant expectations, which is why JRPGS which follow RPG convention are so heavily criticized, action-type games from Japan are treated with differant standards.
Typically a lot of Western RPGs will give you an event you need to achieve and let you run around the "sandbox" deciding when, and oftentimes even how you achieve that goal. Your following a plotline and act within the context of it, but aren't typically forced down the same pathway the same exact way and at the same exact time as everyonce else.
Going back to old games like "Might and Magic" you were pretty much given a general hint that there might be something cool in "The Inner Sanctum" at the center of the Astral Plane, but no real set direction on how to accomplish this though there were specific things that needed to be done (and clues on what those were). You could for example wander outside the cities from the very beginning and get pwned horribly, do the dungeons more or less in order or skip around and do them in whatever order you want, or simply go tearing accross the countryside looking for the wierd stuff scattered all around.
The original "Wasteland" also followed a convention similar to this.
More modern games like "Oblivion" and "Fallout 3" take it to a whole new level, pretty much giving you infinite freedom to just wander around the game world doing whatever you want within the context of the mechanics/storyline and even quite a bit of lattitude in how you go about completing the story directives.
JRPGs generally do not do this, most action games do however, so it's forgivable in the context of say "Bioshock" where you take the levels more or less in order, and it's kind of set what you could potentially have at any paticular step in the progression. It's very rare when an action game like "Grand Theft Auto" provides any kind of sandbox enviroment which is why that series and it's imitators have suceeded.
As far as the compromise between story and interaction, I do not feel that the two have to be kept seperate at all. Yes it can be hard to design a game that has good writing and freedom but it can be done (and has been) and simply put the benchmark for games is rising.
I think there is only a "Debate" on the subject because a lot of game develpers understand what it's going to take to produce good games, and a lot of them really wish it was otherwise because it makes their job easier when they only have to worry about one or the other.
A bit of a ramble, hopefully I'm not totally off kilter in the way I responded here. Probably quite redundant with what was already said.
>>>----Therumancer--->