OK, I will not talk about the Gothic games here, because that would be like kicking a dead horse. The first two games do *everything* right, and 2 is as close to perfection as it was possible in 2003. Besides, I need to give those games a rest.
But there's another gem that seems to have been forgotten these days, and it was one of the most immersive games I've ever played: Outcast.
I take it most of you have at least heard about this game, but it seems few people here have actually played it. If that's the case, it's a real shame.
Outcast didn't do one or two things right; every little detail about it was thought out to draw the player ever deeper into the game world. Every little insignificant fetch quest was relevant to the bigger plot (after all, a big point was to win the Talans' favor to help you in the fight against Fae Rhan), every weapon or item you came across had a reason to be where it was, and even interface aspects like the savegame were explained in terms of the games universe. They even found a way for everyone in Adelpha to call you by a name that felt as alien to your character as it felt to you, the player.
TL;DR: I have never felt as immersed in a game world as I did with Outcast -- not even with Gothic 2. And if you haven't played that game, you owe it to yourself to correct that as soon as possible.
And OP: I couldn't agree more with you. You even made me want to play Legaia again, and for such a long game, that is saying something.