It comes down to two radically different playing styles.
One person likes the game to be the beer and pretzels type. Sit back, roll dice, laugh a lot, etc.
Another person likes to be their character, though not neccisarily in an unhealthy escapist fashion. They love being fully immersed in what's happening, and when their character cries, they cry (though perhaps more on the inside then on the outside.)
Sorry PC, this is a gross miscaracterization of many games. Your model is not at all adequate, leaves out a ton of paystyles, and actually is highly condescending. I very much agree with mhacdebhandia on this. I am not at all a beer and pretzels kind of player (Though I do really enjoy both, my play is hardly what could be called beer and pretzels). I actually do a lot of PbP because it allows people to better RP their characters than tabletop. You can believe their character more if there isn't a player that is diametrically opposed to the character that they are playing sitting right in front of you.
This very much comes down to whether you want to try the method actor route to characterization or the author stance to characterization, or any of a dozen or more others. I would bet that method actor DMs are extremely rare. How do you get immersive with a character when you have to play more than one at a time? Do these people then default to beer and pretzels DMs in your model?
To address the OP, I try to bring just a little of the character's experience to my players by limiting what the players know about the world to what their characters know about the world. This is mostly impossible, but the closer you get, the closer the players get to feeling like their characters do.
I create a lot of custom monsters. 4e is great at this. The players never know what they are facing. I reskin a lot of monsters, so the players never quite know if what they are facing is what they think they are facing. This goes back to the advice in the BECMI and AD&D DMGs. The players shouldn't know what is behind the screen. It extends the wonder from the characters to the players.
The fear that the characters have can be extended to some extent to the players by having a TPK with your group. This sounds confrontational, and it is to some degree, but it works. Kill all the characters. Preferably before they become to invested in them. This sets up the world as uncaring, even if you pull the strings and really do care. I think that some of the most meaningful victories in my games have come as part of round two against the BBEG after the first PCs were all creamed. Not for every group, but it has been cool for mine.
I guess that what I am saying is that the info on the world should be a comodity that the characters and the players both earn at the same time, and that I prefer to balance the game slightly harder than what the 4e DMG says, and kill all the PCs every now and then. It actually leads to better games.
I like wish lists. It makes my job easier. I don't just hand them whatever they wish, but I can find a plausible reason for anything to exist within the general campaign plot. My players know that they will usually get what they want eventually, but it might take a while. I give it to them, but on my terms.