I think hitting the peak of immersion will require realistic weather effects. But not only graphical effects need to improve. There's something far more important that I think has yet to be attempted.

Seeing the effects of water on objects and landscape is definately the next step. Drake's has done well stepping into this area. But mud after rain, snow build up, dripping gutters, and similar effects need to be added.

But the most important feature that needs to be implemented has to do with NPCs. I find it interesting NPCs simply walk about in the rain and take no heed to storms. I would love to see NPCs run under awnings or go inside when it starts to rain. Or shield their face or use an umbrella if they are out in it. In cold weather I'd love to see the clothing change to reflect the weather.

NPCs should react realistically to the environment. That will be the "cherry on top" when it comes to weather and immersion.

Since Fable 1 really only had 1 major city, I am hoping Lionhead goes out of its way to make the Fable 2 city as realistic of a simulation as is possible. Seasons, weather, NPCs going about their business, etc. Of course my perfect game I describe is still far in the future, but I hope Fable 2 lands close. I'll buy it either way.