Like many things, how much realism is the best depends on the person who is judging and on perspective. Of great importance, too, is HTC being able to generate money with its product.
In Air Warrior originally, you couldn't do accelerated stalls (like having the stall limiter on at all times), the sim was run in half time, there were no black outs or red outs, there were no spins, each plane had a hit bubble, not independently targetable parts, there was no convergence setting, no drop tanks, the damage model was extremely simplistic, etc.
Then the game was enhanced to allow for accelerated stalls, spins, blackouts, redouts, and for 1:1 simulation timing. There were a lot of people who didn't want even that much realism. They didn't want to have to deal with stalls, spins, blackouts, etc. So Kesmai had a full-realism arena and a relaxed-realism arena to appeal to both camps. The arenas ended up having comparable attendance.
It is interesting to me to see that, in Aces High (and WWIIOL and some other games), the level of realism is *way* beyond what people got in the full-realism arenas in Air Warrior. It is into the territory of what people back then worried was unplayable by the mass market. Yet we see that the game is still accessible enough to draw large numbers of players -- many more than Air Warrior used to have.
This is the aspect of perspective. My guess is that all of these sims will get more and more realistic over time, and many things that some people today regard as unwanted distraction will end up being accepted as a fine part of the game (much like trim, being able to set gun convergence, blackouts, being able to target different parts of an aircraft, p factor, prop torque, etc.).
Realism also isn't just one axis, with one adjustable parameter to adjust the amount of realism. There are many axes. There is realism in how the plane flies and is managed (plane handling, flight controls, engine controls, etc.). There is realism in how things look (clouds, ground, trees, other aircraft, damage effects, etc.). There is realism in how things are damaged (how guns fire, how they do damage, how bombs are dropped, how they do damage, etc.). There is realism in the combat environment (what alts fights take place at, which plane sets are fighting, composition of forces, etc.).
It seems that most people want maximum realism in how things look and how damage effects work.
It seems that a lot of people want low realism in combat environment (so that they don't have to fly for an hour for a fight, so that they can fly whatever plane they want, and so on). Those who want more fly scenarios. But there is a group that would like everyday flying to have a more realistic combat environment, so it's good to have areas available for both groups of people. Tour of Duty seems like it will solve this.
Where people are really split is how much realism there should be in how a plane flies and how it is managed. Maybe the best way to handle that would be to have arenas dedicated to various amounts of realism. Whether or not that would be worthwhile to do commercially depends on how many people want more realistic aircraft management. Or maybe it just comes naturally as time goes by. Again, think about the things people have today that in the past were considered too complicated for any mass market of ham-fisted arcade-game players or that were considered to be unwanted distraction from the fun of flying and fighting: aircraft trim, control of prop RPM, separate control of different guns with different convergence, prop torque, p factor, spins, even accelerated stalls, blackouts, and redouts.
For me, the most important realism is in aircraft flight and management, followed by damage effects. I can then get realism in combat environment with scenarios. Last on my list is realism in visual detail. That is probably the opposite ordering of a typical Aces High player, though.
