I think you confuse a game looking realistic to it also being bound by real world physics. This is a problem I have with Sim games. Cars, sports, farming and whatever other thing that trying to be as close as possible to what we do now. That for sure is the death of creativity.

But you put in monsters, crazy weapons, superpowers, crazy mechs, space travel, rpg mechanics and anything that makes gameplay gar from trying to be in a normal world and the graphics won't impeded your creativity.

Shatts, where have you been all of my life? Yes, the game industry is too obsessed with producing cutting edge graphics. The cost of this is so high now, that they end up cutting corners in other areas like gameplay. Getting the most high end graphics is just not worth it anymore.

Prettiest game ever made is Wind Waker HD.

This could be copy pasta from 20 years ago.

Usually it just boils down to people saying "I only like this style so people who like another style are wrong."

Dito

The "graphics at the expense of gameplay" dichotomy, is false for the most part. Visual presentation and gameplay mechanics design are two different jobs done by different people actually. It could make sense for low budget games with limited amount of staff, but in that case, what cutting edge graphics technology could you afford?

Every former fan of the Final Fantasy series knows this dichotomy is real.  Final Fantasy games used to be excellent all around: graphics, gameplay, music, world building, story, etc...  Then Final Fantasy 13 released.  Visually it's one of the most impressive games on the PS3, and the music is excellent too.  Gameplay, world building and story are all noticeably lacking compared to earlier Final Fantasy titles.  They didn't even have towns.  That is a severe cutback.

Budgets are limited.  Companies choose how many to hire for each job to work on their games.  Currently for AAA games it is common for artists and animators to take more of the games budget than all the rest of the staff combined.  It did not used to be this way.

Or like Elden Ring repeating the same bosses over and over...  

I prefer stylized art styles overall but realism does have an important place. There's value in trying to get closer and closer to matching real life and seeing how far things have come over the years. It also is benficial to some types of games since one I really enjoyed Forza Horizon 4 definitely would not have been as enjoyable if it didn't have a realistic art style since that added to the enjoyment of driving around a representation of the country and city I live in.

Such a flawed post lol.
Most of the best games are high graphic games.

Elden Ring, Horizon West, Red Dead 2, Halo Infinite.

What exactly do you want to be innovated? And what genre are you talking about? If you are talking about open world, they are constantly trying to put new stuff in. That is why you see GTA5 with the different person perspective, games like Watch Dogs taking on a hacking perspective. And then you have games like For Honor, Skull and Bones, new generations of Assassins Creed. For RPGs Square has tried to innovate and make new combat systems for every numbered final fantasy coming out. There's actually plenty of innovation in the industry.

More like you are asking for the sky because you don't know there's a limit because you are not a developer.

Back to your point. One of the developers don't care much about graphics and that's Nintendo. Do you see a lot of innovation from them? I see Mario after mario, Zelda after Zelda. There's some innovation, but not much more than the rest of the industry.