I do, in fact, think it is something of an either/or situation, for two reasons (again, just my thoughts, and certainly not any sort of cosmic law). One reason is philosophical. We’re talking about two very different types of games. One is built around systems, and repeated activities that are common in their essential structure, with just enough variation to offer some different contexts in which those systems can operate. There is narrative, yes, but it’s more the narrative that grows from the repetition of the same actions within different contexts (location, gear, enemies, etc.) rather than from actual story lines. The other is built around stories, for which the systems serve as mechanics through which players can advance the narrative. Narrative here is built explicitly as story telling of the more classical sort, and while systems can be quite important to the overall experience, they are not central to it. In the former, you can take away the story line entirely and still have a game; in the latter, one could argue, you could take away the systems/mechanics and still have a strong narrative (though I’m overstating it a bit here probably). An example of the first type of game is Diablo III. The narrative is utterly inconsequential to the narrative of character development, which is accomplished via repetition of combat in differing arenas with differing foes and differing gear sets, but all within a fairly narrow band of variation. An example of the latter would be something like Kingdom Come: Deliverance, at least in my opinion. There, you experience a story centered on your character, where the game mechanics get their meaning from how they define your character, not from their intrinsic fun. The story is essentially fixed, in the macro sense, and you are creating your own place in that narrative. If you were just grinding stuff and fighting hordes of faceless opponents to get more loot, it would simply not fit. Likewise, in a game like Diablo 3, having a bunch of really detailed and hand-crafted quests would probably just make most players cranky, as the point is to fight hordes of faceless enemies.
The second reason I think you can argue that it is an either/or situation is practicality. The sheer volume of stuff you need for a game intended to be played ad nauseum, repeating the same basic actions again and again in a kill-loot-level cycle, I think generally precludes doing anything other than cookie cutter repetition. It can be done well, or not so well, but when the point of the game is huge amounts of stuff to kill and loot, again and again, there’s a hard limit to how much you can hand craft things. There’s always going to be a trade-off between volume of content and the degree to which that content is closely directed and crafted. To create custom, thoughtful content for a game where that content is ground through at prodigious rates seems unrealistic.
But again, just my thoughts. I like both types of games for different reasons. I just don’t see a need to have both archetypes squeezed into a single game.