Actually I'm thinking about doing a sound-based mod for this game for my music tech degree. I can understand how the wrong music could break immersion in a tense dark dungeon, but then epic music while fighting a 50ft dragon certainly enhances it. I think it's immersion in a GAME, doesn't have to mirror reality (shooting fire from your hands and talking to lizard folk probably scuppered any concept of total realism a long time ago).
Having said that you've given me an idea, to do some more ambient sounds for creepier parts of dungeons - make it like Silent Hill

THAT is far more mood enhancing and immersive than eerie incidental music could ever be (with the exception of one scene in the game "Scratches" where you first hear sounds inside an oven and then the high-pitched strings going up and down like a siren with each violin doing it differently added to the apprehension, kind of like the orchestral piece called "Threnody").
TO me, Without Music to mask it, hearing the drip drip of water in a dungeon and hearing some far away "Predator" Like clicking noises that the skeletons do is more immersive then
any music could ever be, and like I said, the music just masks that stuff and lessens the creepiness of the ambient sounds..
IIRC, there was one vault in FO3 that scared me, because it had ambient sounds like laughter sounding very far down in the vault, I was actually planning a mod similar for FO3 where you'd get to certain points in the vault and 'trigger' a glass falling and breaking or a scream etc...that stuff gets my heart racing, because I'm focused on the sounds and not distracted by music
Really? Thats very interesting. You don't find the benefit in both filling space, and the moods music can provide to FAR outdo the fact it doesn't exactly make completely realistic sense? For me immersion and realism are somewhat different. Certainly completely unrealistic things immerse me.
As a musician for 34 years, music in a game is far too distracting, because I start learning it and memorizing it (from so many years of learning songs by ear), so it's just annoying, distracting and repetitive, and I find the ambient sounds of the outdoors, wind, wolves, birds bandits talking much more immersive, as it is, the only time I listen to music is when I'm recording it or playing it, or driving, I just hate it "getting in my way" when I'm playing a game, to me it's like having something in your eye while trying to watch a movie.
The immersion is lost if the music is on, and I'm hearing the "Wandering around theme" and it suddenly changes to "The Fighting time now Theme",
may as well have big flashing neon signs that say "HEY you're going to be fighting pretty now!"