It’s important to separate art from technology. With baked lighting, you have lighting artists go in and create dramatic lighting for each area they know a player will visit. They can add lighting in there that doesn’t visibly exist for artistic effect.
For all purposes, baked lighting that a whole team works on will look better than real time lighting and run better too. The only problem is that things don’t change, which is fine if you make a game where nothing changes, but not fine if you make a game where things do. See movie lighting: real lamp posts versus movie lighting
Dynamic lighting, shadows and reflections opens up game design to support changes in the world, and it also means being able to support lighting for procedurally generated content as well.
That’s the trade off. Eventually we will get to the point where things look fairly realistic, but the reality is most things like photography and cinema seldom are. They are very controlled and that’s what artistry is supposed to be about.