I think it's totally true.
I don't want to dismiss the fact that a great story combined with a great game - "Deus Ex" comes to mind (i liked the story) - can make for maybe a slightly better experience, but the underlying philosophy, that gameplay >>> story is totally true.
If i really think about it:
Would i have been equally happy with the Deus Ex game consisting of different Levels/Challenges instead of a whole story?
I really think it wouldn't have mattered that much. Just going through different challenges/stages with no big story to tell, i would have been equally happy with that.
Note: I am of course talking about the original Deus Ex, not that i don't like the newer one, but i just have never played it.
Maybe for some games, but for others it's nice to see some elements of great story-telling.
Of course, you still want to have good game mechanics, interactivity, graphics and fun, but the medium has evolved to the point where you can tell a good story.
I think it's very much a quote of its time - I agree with you that the problem is primarily one of medium, and at that time the medium wasn't able to adequately tell complex, compelling stories.
The market has definitely evolved now - there's still a demand for great action games where story takes a back-seat to the sheer enjoyment of playing, but there's also demand for games with compelling stories (just look at the backlash Mass Effect 3 had, rightly or wrongly). It's like films, or TV - sometimes you just want to watch big things blow up, other times you want things that make you think.
Love this quote as well. Diablo 3 especially comes to mind here. Couldn't stand all the the excess scripts & voice acting they stuffed into that game; just dilutes the experience. And I'm not even opposed to story in games - I really liked the story in Deus Ex (original) for example. But they knew how to strike a balance.
I love this quote. I think many of today's AAA game designers need to take heed.