I agree that the Conan and Mouser/Fafhrd stories have about the right mix of mundane vs. fantastic elements. The games I run typically involve more mundane opponents (classed NPCs, normal animals, and basic races like goblins, orcs, etc) than out there monsters like fire-spitting beetles, elemental archons, or bears that crap lightning. I tend to be pretty firmly in the simulationist camp when it comes to populating my world and internal consistency. Too much wahoo makes it hard to take the setting seriously, and makes you wonder why there are ANY mundane animals/creatures if they are far outclassed by the wahoo stuff that is apparently common (I'm noticing a lot of drakes in the 4e published stuff for example).
However, I also love 4e and the way it treats monsters and NPCs. 4e really supports my playing and DMing style in a way no other version of D&D has. I can whip up a "classed" NPC in a couple minutes now, rather than 20-30 min as in 3e. Also, monsters do more interesting things now, and are MUCH easier to run. And the occasional wahoo monster from the MM I use REALLY stands out as being something weird and dangerous. I look at the MM not as a be-all-end-all collection of monsters, but as a reference to give me ideas and draw inspiration from. In that regard, the 4e MM is a huge success- I've come up with more really interesting critters since reading the 4e MM than I have in the previous eight years, especially in regards to unusual things 4e critters can do in combat (their "schtick" if you will).