yes, you can have to much realism.
Take America's Army for example. It is realistic in many ways (they use it as a simulator in the Army) and I love playing with my friends, but many people complain about some of the "realism". For example, 1-2 bullets and your dead and don't come back until the round restarts. Most people don't like that.
Again, if you got shot in the leg and the game made you fall to the ground unable to move, you'd probably think it's lame.
Anyways, yes you can go for realism, but in most cases you can't make it perfectly realistic, or people will get bored. Now, some genre's like sports don't need to have fantasy put in them, but most do need a tiny bit of fantasy mixed in to get a good game.
personally, I prefer games that are mostly fantasy based, but kept in line with some realism, like Mario for example. Sure it isn't realistic, but they keep within the bounds of what we would expect from a person








