I did AS level Music Tech at school and part of one of the modules is all about making MIDI sound as authentic as possible.
In my experience solo instruments are often noticeable in MIDI, where as when you start layering more and more instruments together and tweaking the sounds, it begins to sound better. This being the reason why solo piano pieces sound horrible in MIDI.
And there's also the fact that MIDI can sound better depending on how much money you spend. With the right sound module MIDI can sound great.
But I agree with the fact that MIDI doesn't sound as awesome as real instruments. It can be pretty damn close, but never bang on.
However, when you're playing a game, you're looking at the visuals, listening to the sound effects, concentrating on the task at hand, controlling your character, watching your enemies...so many different factors that take your attention away from the quality of the music going on in the background.
So when you're playing a game its really pointless having orchestrated music when MIDI can sound pretty close to the real thing.