But that's precisely where I was drawing the distinction.
Spending resources on (scales of abstract->realistic):
A) Photorealism (rendering/visual technology)
B) Physics (feasibility in asset interactions)
C) Asset design (everything as close to real-world believability as possible; environments, life, architecture; aesthetic?)
D) A+B+C (verisimilitude?)

Modern CG cartoon films focus more on realistic A+B, not C (favouring abstract and stylistic designs, especially for anything 'alive').

My point was that there could most certainly be a 'photorealistic Minecraft' - that is, focusing on A and B, retaining the block-style abstract world design.

: There would be no point in it whatsoever.

Sure there would. "Art". :P
Also, realistic A+B not C means avoiding having to deal with uncanny valley situations that can arise if you try to mimic real-world design as much as possible. If it looks like you're trying for real-world aesthetic, then visual expectations are much higher than if you were clearly trying for an abstractified aesthetic. Even if your rendering and physics are closely mimicking reality.

: Exactly. And it goes beyond the characters in an imaginary world. Go play
: Marathon and Doom; they have the same wall textures span large segments of
: the map, more like wallpaper than natural rock or purposefully-designed
: spaceship interior. But because the world was so clearly abstracted, it
: didn't matter. It also didn't matter that the world was seemingly created
: to be fun to run around and shoot aliens and demons in.

Right. Technology was nowhere near advanced enough to get closer to 'reality' than that, even though its release was a huge step towards it. I remember the awe I had when first stepping out into the Doom world - my imagination went wild, dropping myself into mysterious, creepy, evil locations, alone. Visually unrealistic, but the relative difference from previous game iterations had my imagination running wild. I can't replicate that feeling any more, playing the same game even, because I've seen much more realistic visuals, physics, and designs. I can only remember how I felt entering that final level of Doom 1... The experience was quite relative to recent previous experiences.

The closer we get to reality in game world construction, the less our imagination is needed to fill in the gaps. That may be a good or bad thing depending on who you talk to. On one hand, I LOVE being in awe seeing visuals more closely mimic reality in the game world; on the other hand, I'd love to be so immersed in a game imaginatively again like I was with Doom. Some games have come close since then, but they were still a far cry (no pun intended).

I think A, B, and C can each be developed independently, especially if there's enough funding for it... but of those three, I'd rather C be the first to go (don't worry about making a character's face appear as believable and real as possible; I'd rather favour some artistic interpretation and styling, across the game as a whole, if it makes that process easier/quicker/cheaper). The balance of A and B I think (and the complexity or scope of development in those areas) very much depends on the genre and style of the game, moreso than the asset design.

Unless the developer is doing something highly advanced, and the goal is real-world realism in all things, I really don't care much about verisimilitude.