PetrusOctavianus: and the game becomes just an interactive movie.
Which is not a bad thing, mind you. The reason why interactive movies were largely unsuccessful was because the technology wasn't flexible enough - you just couldn't produce enough quality content with branching story. Videogames make this much easier. After all, Planescape: Torment was just a little more than an illustrated interactive book - and look at it's success!
PetrusOctavianus: The more options you have in a story driven game, the more watered down the writing will be
Again, look at the sheer ammount of text in Planescape: Torment. Did it seem watered down? And most modern games don't any longer need a description of what's going on, which clears up a lot of writing space. And that can be used for quality dialogue.
PetrusOctavianus: Well, I haven't played The Witcher, but I understand the writing was actually done by a professional writer, and not the average hack that writes for most games?
It was an average hack, the professional writer wrote The Witcher novel. Writing in the first Witcher game is actually fairly poor for the most part, but the overarching story is very solid and choice and consequence system rise the game far above average. Writing improved dramatically in the second game, and it kept the good bits.
SkeleTony: story in say Planescape is hardly better than the best stories of some FPS, point-n-click adventure, etc.
Yes, they also offer all those ways you can get trough that story, sometimes there's even like two! ... As compared to about one bzilion in Planescape. This is what defines RPG: Choice. No matter whether is within combat or story.
See, this is the bit you guys don't quite get: RPGs offer an interactive approach to story. It's not comparable to reading a book, since you can't rewrite a book and then pretend it's canon.