I think I felt more immersed in retro games because my brain knew that it's supposed to fill in all these details. With modern games it's close to realistic, but not quite, and my brain doesn't even try to fill in what's missing. It's also more difficult to concentrate on the gameplay when all details are rendered on screen.
I'm also constantly surprised how little graphics matter for an enjoyable experience. A game with amazing graphics blows my mind for 15 minutes. But then I'm used it and I stop caring about visuals altogether, unless they get in my way.