3 words - suspension of disbelief.
it is a game. no getting around that. a friend was telling me recently about his experiences with doom III, about how he could play the game as just that, a piece of software which has certain patterns and outcomes. alternatively, he could draw the blinds, stick on the surround-sound, sit with his face an inch from the screen and immerse himself in the experience, thoroughly scaring the wits out of him in the process.
for me, good flashpoint missions allow suspension of disbelief very easily. all of the points made above contribute to this - storyline, believeability, timing, balance. in gubes' "making good missions" he tells us to ask why something is there, why these loons are doing this, all to contribute to believeability.
if a mission designer simply puts an enemy squad where he knows the player is going to be to create some action, that slips into the realms of arcade. as mentioned above, sometimes a player will be in the mood for a fragfest. sometimes the player will be in the mood to fire up abandoned armies and see how stamanov is getting on in his 15th hour of gameplay...
the point is, if you veer towards either extreme, either realistic or arcade, eventually the player will be disappointed. in the realistic case, no matter how many ultra-detailed, true-to-life addons are included, no matter how realistic the situation, the ai loons will always act stupidly at times. in the arcade sense, the player can run around fragging and blasting and still be taken out with a single shot from out of nowhere, instead of the usual taking-hits-until-health-bar-reaches-zero.
as with most things, balance is the key, and i think mikero is right in saying the storyline is a major factor in this. when watching a film or tv show, how many times do you as a viewer think "hmmm, i'm sat here watching a film or tv show..."? if it's a bad film, you know it. you feel like you're wasting your time. if it's a good film, you sit there for 3 hours and want to go back in after it's finished. why? storyline, characterisation... in short - suspension of disbelief.