I don't know if this is old news, but I was linked to a Lee Sheldon PDF at work (Lee's site here). He covers, in an easy to understand way, how I've felt about storytelling in games for a long time.
To be sure, there's a lot of unanswered questions: How can mainstream development possibly be converted to this almost totally philosophically polar approach to storytelling in games? We tend to love to stick to fragile, film-aping storylines, just as television stuck to radio style plays, and then theater before finding its own legs.
We rarely attempt anything like systemic characterization or mission design, because it's so under explored. And it's under explored because there are so few good exemplars of the approach. It's a catch 22 which I feel can only be fixed by the indie scene and academia, or developers trying experiments in their own time*. Far Cry 2 seems to be promising a hearty stab in this direction, too, so I shouldn't entirely discount the mainstream's ability to push this issue. Ahk, what am I saying? Anyone and everyone can contribute to this direction in games. Heck, even Mercenaries 2 sounds like it's philosophically aligned with this attitude (in that they refused, from the start, to make "fragile" tasks which result in "Fission Mailed"). It's just that there's going to be a lot of trial and error before we even begin to settle on something cool, and I hope that won't dissuade people from the idea - from continuing to try this stuff out.
Personally, I feel like this approach (or something like it) is one of the more natural uses of the medium - certainly more natural than gameplay book ended by cut scenes, or trying to manipulate a player's emotion when you could simply react to the emotion they express.
I can certainly feel the shift in outlook amongst developers, but ultimately, many of them may not be in a position to do this approach justice any time soon. There are lots of growing pains to go through before we get there, and a lumbering risk averse mainstream to convert before anything big budget comes out with this approach (with notable exceptions, obviously).
I think we also have to accept that whatever comes out of this approach probably won't feel like whatever ideas the phrase "Interactive Movies" conjure up. It'll be its own thing, like like TV is a different feeling thing to books, or dance. I think we have to respect that, and not fault games for not being interactive versions of other mediums - let them be what they naturally want to be.
*Not to blow my own trumpet, but K2 will eventually go in this direction, after decent core gameplay is established - assuming I can expend the effort outside of my day job, which feels less and less likely.
15 hours ago