IMO: That wouldn't work with my friends, it would irritate them. None of my friends like WAHOO movies, TV shows, or books. And my gaming buddies assume that "game" means something they can master and, properly played, definitively win.
I introduced one of my older friends to D&D the other year. Almost immediately he said, "What's the point of levelling up, do I just fight more powerful monsters then?" Similarly, changing encounters on the fly to spoil player mastery would probably end my game right quick.
This is a pretty good example, like EW's post, of different perception/conception of D&D and RPGs.
All the preface's I'd ever read in PH's said D&D wasn't a game that you could "win".
And the point of leveling up, was so you could fight more powerful monsters.
However, I disagree with KM's comment about keep adding in bigger dragons, if the last one was a disappointment. To me that's a failure to execute the style I like.
As to the last point by delta, "Similarly, changing encounters on the fly to spoil player mastery would probably end my game right quick. " I'd have to say a good GM makes this fun, and unless the GM takes notes (doesn't run things off his head on the fly), you have no proof a DM is changing encounters on the fly. Additionally, a good GM should be changing encounters on the fly, to account for what the NPCs know about the PCs current activities, etc. If the PCs are sloppy about their investigation, the NPCs are wary, and will be ready for the party. This means the DM did change things on the fly (especially if originally noted, the NPCs were playing poker in the garage).
Playing encounters statically as written, means the GM has to write it down, and has to plan everything out. And isn't allowed to adapt to player whim (because if he didn't plan it, he can't do it, to take static literally). This would be like playing Oblivion, where you sneak attack an NPC who's talking to another NPC, the 2nd NPC doesn't react or notice that the conversation stopped, and his buddy is dead.
Since the GM can do anything he wants, at any time. The only contract is that the GM give the players an experience that the players are seeking. If he says he's going to be simulationist, he has to act simulationist. But the fact is, he's doing whatever he wants, to make that happen. That's the illusion. There is no band of orcs, until the GM invents those orcs. It all starts and ends with the GM.
My point then is, if the players think its a game they can master and win, the GM can play that way. But the fact is, the GM is only pretending to do so. The GM chooses which NPCs exist, and how they feel, and what they're goals are. He chooses where the treasure is, and what protects it. If he wants it to seem like a game, he can.
However, it isn't. And the GM can change that anytime he wants. though it may be at the expense of players who dislike the style change.