Technically true, but I don't think it matters. Sure, the brain can easily tell reality from our electronic media apart, but very frequently it choses not to. We don't need super photorealistic graphics for that - I've personally been sucked into games and movies with anime characters, and my brain didn't care. As long as the virtual reality is somewhat consistent and doesn't mix with the "real reality"[0], the brain can accept it as real - especially if you distract the player with a good story.

[0] - keeping out the "real reality" from showing up involves obvious points like keeping distractions (especially other people) away, but also some meta-points; if your product has glitches or even simply keeps "breaking the fourth wall", it may be just enough to prevent any kind of immersion from happening