One of my formative moments in game design was reading the critique of immersion in Salen and Zimmerman’s Rules of Play. They cite Frank Lantz, director of the NYU Game Center, in pointing out that Star Trek‘s holodeck is not the be-all and end-all of game design. Even if one built the holodeck–the perfectly immersive experience–that would not be a game. It would be, at best, a place in which to have a game. Immersion is not gameplay.
I just found out that the original talk in which Frank Lantz makes this point is available online. Let me urge you to take six minutes and ten seconds to listen to it; I think it will prove valuable for your thinking as well.