I do think the more plot / information / background you can tell in quips, banter, scenery, pictures, graffiti and so on, the better you're succeeding as a writer. We all know you should show, not tell. Your characters shouldn't dump info, the info should be inferred based on their actions, beliefs, even looks. From what I've learned, people tend to advise you to lead readers to the conclusion rather than spelling it out. You'd avoid writing "he was angry" unless you want to keep the part moving along quickly; you'd rather write what exactly makes the character look angry? Or how does he chose his words that indicate anger? That sort of thing.
If we're honest with ourselves I do think even PS:T and KOTOR 2 (much as I adore them dearly - I do think other than NieR there aren't really any better written games) suffers from this at the start. I often have trouble getting people to play these games because there's a lot of text very early on. The mortuary in PS:T, that station in KOTOR 2 and that long cave in MOTB.
But then, I don't really have a solution either! Starting in medias res too much can quickly lead to confusion, too. You know MCA, if you're really reading this, I suggest you try playing the beginning of Dark Souls. A lot of the story and setting is told without words, simply through the way the enemies look, the areas are designed, the architecture, the tone of voice of the characters you meet.
Which again, leads me to an interesting conundrum - if we really, really want to create an amazing game it needs to be a gesamtkunstwerk. The writing can be as good as it wants if the art design, the music and so on aren't properly conducive to the whole... so in essence, to make the best RPG (or game) possible, we need not only the best writer, but also the best animators, artists, level designers, and so on. And most of - and maybe that's me being a fanboy of Japanese games - we need a director who ties this all together. A conductor if you will, someone who makes all the parts go together. You can't enjoy Beethoven's 9th if the choir is too loud or the violins too quiet or fast, right?
Meh, I didn't really write anything here we don't all already know. But I guess I felt like doing it, anyway.