Game stories should mostly stick to providing a context that gives the action/gameplay meaning. When games try to portray an epic narrative it often falls flat on its face. I think 'intellectually dishonest' was a good way to put it in the OP. Another prime example of that is Niko Bellic in GTA IV. On a way to a mission he'll blurt out all tons of emo crap about his life during the war and just wanting a better life, and upon arrival he'll kill literally dozens of people. And we're supposed to connect with him on an emotional level? Please. I think Trevor in GTA V is a sign they realised that, as he's the biggest maniac in the series since Tommy Vercetti, and it matches the gameplay of the series much better.
Then there is the problem of interactivity and how much storytelling can get in the way of actually playing the game. Not a lot of games do that right, and I think I only managed to immerse myself in the Mass Effect trilogy and Cryostasis in that sense.
But games also have some advantages in regard to story, namely that there is much more space to elaborate upon certain ideas or plot lines than in a 90-minute movie. Elder Scrolls has always had bad storytelling, but the lore that surrounds the franchise still makes it a fascinating game world to walk around in. An additional advantage is that you are (mostly) free to ignore things you aren't interested in and focus on those that you do care about (which is an advantage it has over other media with bigger scopes, like books and television series).
In the end I don't see it as a real problem as long as developers remember why we play video games and don't go all Heavy Rain on us in a desperate attempt to not let the player interfere with their 'amazing' story. I'll read a book for that, thanks.
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