I disagree. The goal for most games is not to simulate the real world accurately, but to be a piece of entertainment (or artwork). That sets different requirements than just "world simulation", both from mechanics point of view and from graphics point of view. So engines will for a long time be able to differentiate on how they facilitate such things; expressivity is a tough nut to crack and real-world physics gets you only so far.

Even photorealism is a shifting target as it turns out that photography itself diverges from reality; there is this trend of having games and movies look "cinematic" in a way that is not exactly realistic, or at least not how things appear to human eye. But how scenes appear to human eyes is also tricky question as humans are not just simple mechanical cameras.