As someone who has completed all Ultimas from IV to VIII (including Serpent Isle and Ultima Underworlds), that's just nostalgy filter shining.
I don't count "believeable world" to be one where I have to guess keyword, and talk with "Name?", "Job?".
Granted, since U5 the NPCs started to actually have daily routines, but...well, ten years after U7, you had a RPG renaissance that started with Baldur's Gate. Have you tried it (with all the fan-made upgrades for todays computers)?
For more recent stuff, well, Skyrim actually is pretty damn good. I'll grant you that earlier Elder scrolls games (I played even Daggerfall) suffered exactly from that lack of immersion, but Skyrim finally feels good.
Then theres pretty much everything Bioware has made since Baldur days, Dragon Age I + Awakening (Dragon Age II suffers from sequelitis), Mass Effect being the recent entries.
And that doesn't even count all the stuff available from indie developers (Magicka!).