There are several styles of roleplay.  What you've described I call the immersive style.  Very much like Armagedon.  There is also freestyle or storyteller roleplay which is descriptive of many Mush enviroments.  There's also gamemastered roleplay, common in tabletop games and on some Mushes/MOOs/Mucks.  IMO, no amount of code or realism will elicit good roleplay.  Roleplay is entirely dependent upon the interests, talents and skills of your players.  The best roleplay I've ever seen occured over a kitchen table or in a chat room, not in a any mud server that coincindental hosted a "game".  I think that's the key, the word "game" or "goal".  If you design a mud server that includes anything that can be "gamed", you attract non-role-players.  

So can one implement an immersive realism without including gameable systems?  I don't know.