I disagree. Graphics add nothing to the immersion, unless perhaps on the most shallow level possible, where the entire premise of the game depends purely on the graphics.
In that case I wouldn't call it a game, but more of a tech demo or an interactive experience.
Graphics add more than nothing. At a minimum, they are an important part of UI, just like on a web page. Colors, affordances, etc. are all important to games. Games like ASCII roguelikes exchange obvious visible indicators for speed/flexibility/pixel size/complexity. Graphics set the tone of the game and have the ability to visually influence the player.
Cramming more graphic textures or perfecting water algorithms might be secondary (or tertiary) to the game, but they can still influence the gameplay directly. Take Team Fortress 2, where a lot of care was put into making each character class have a distinctive silhouette, so at a glance you can see who everyone is from a distance or from different angles - this isn't what most people talk about when they discuss "graphics," but it is the element of graphics that matters most.
The entire premise of Portal is based on the ability to use 3D rendering technology to create the effect of opening up portals between surfaces. I don't think anyone would argue that Portal is a shallow tech demo. Narbacular Drop maybe was a shallow tech demo, but that same tech-based premise, when used by a masterful game design team, created one of the best video games of all time.
Likewise, the entire premise of Minecraft depends purely on the simplicity of a voxel-based world - a technique for defining a procedurally-generatable, deformable landscape. Maybe Minecraft is only a tech demo or an interactive experience, but... it's a damned successful one.
Narbacular Drop maybe was a shallow tech demo, but that same tech-based premise, when used by a masterful game design team, created one of the best video games of all time.
What has the story and design of Portal to do with graphics? Nothing, because story and design are independent of it. Would Portal be an equally great game if done with the engine used in Narbacular Drop, but with the same design and story. Yes, again graphics has nothing to do with story and design.
So to reiterate. What made Portal great has nothing to do with how many pixels you fit on the screen or how many shadows you can render. What made Portal great was story, design and the tech( portals ).
Well, not quite. StarCraft and WarCraft II used 2d sprites, but those 2d sprites were generated from 3d models - its what gave them so much depth for their time (and also made them look muddy compared to hand-drawn sprites).
If I recall correctly, in WC2, the entities were modeled in clay/plasticine, photographed from several (8?) distinct fixed angles, and then artists hand-painted cels over the photos. The cels were then scanned and digitized into 2d sprites. The maps were flat images with hidden metadata layers to define land and water boundaries.
I also recall that you could replace the peons' wood-chopping sounds with fart noises, which was hilarious for almost 30 whole minutes.
In that case I wouldn't call it a game, but more of a tech demo or an interactive experience.