My current play group, wherein I’m playing and not GMing, is doing an old school World of Darkness game. Its fun. Its enjoyable. It has 2 major problems. Most of the players are all old school World of Darkness experts. Two of us (myself included) are not, but are full of interesting ideas. This dichotomy of purpose causes our group to constantly come across instances of “It doesn’t work that way” or “According to this thing in this sidebook, they wouldn’t do that”.
This causes our games to run less like a group playing a game, and more like a library study-group. Most of the players have their noses buried in one splatbook or another, trying to figure out if their character action would be relevant to their group, or trying to find out where the nearest Cairn or Chantry would be. The rest of us wonder if its going to be important in an hour, and question whether the name or exact location will even be remembered or matter. Issues are also encountered when a player tries to do something in a unique way, or has a really good idea, but gets shot down because of some piece of flavor text. I watched this happen to both the inexperienced players and the W.o.D. experts alike.
In essence, the ultra detailed nature of the setting prevented the players, even the ones embracing the ultra-detail, from laying their own interpretation onto the game being played at the table. The desire to game in a detailed and realistic world prevented the players from doing cool things with their characters.
The Company Owned Setting
Ultra-detail isn’t a problem that is limited to old school World of Darkness. It’s present in almost any setting that is popular enough to generate splatbooks. Forgotten Realms  and Dragonlance  were also fairly large offenders in my role-playing youth. Eberron  can be particularly bad as well. I dare say that Monte Cook’s excellent Ptolus  is the epitome of ultra-detail. I’m sure you can name many more settings that have as much detail. Thing is, I love all of these settings and games.
Any game company with a popular setting is going to try to build on it and produce as much material as they can. Designers usually can’t wait to get the first book out the door so that they can start producing supplements. The first book has to be fairly generic by its nature. The rest are where the designer can lovingly craft the detail that they really want to bring out of the world. And splatbooks make money. Moreso than the initial book in a setting or the rulebook. They’re usually slimmer, need less design time and are more in the hands of the developers than at the whims of the game system.
Every splatbook, unless its billed as just flavor, has to offer something mechanical for the players. New rules, new classes, new powers and new shiny items to give people a reason to buy it. Official options for a necromancer knight are written into the new classes. New items that have great powers are posited. Game balance goes a little wonky, but new fun things are provided. Little dark corners of the world are filled in and more than the paragraph in the main book is devoted to specific groups or options.
The GM’s Home-Brew Setting
Issues of ultra-detail aren’t limited to official supplements and company settings. Home brewed settings can be as detailed and restrictive. Many Game Masters work on their lovingly crafted worlds, developing the smallest details of the symbols of a particular group, the economic factors of a particular land or the mechanical complexities of a newly created class. Lord knows I’ve created a few of these worlds myself. These floods of detail in a home-made world setting can create an incredibly immersive sandbox for the players to run around in, or turn players into the puppets of a control fiend Game Master . That’s a worst case-scenario.
The big issue with ultra-detail in home-brew settings is whether the players have access to all the necessary information or not. If the social mores  of a Game Master created culture are only written down on a piece of notebook paper that is buried in a folder somewhere, but fresh in the Game Masters mind, then the players are going to have some trouble understanding why shaking the hand of the elven ambassador landed them in jail. Even when they all have ranks in Culture (Elven).
Thankfully, the wonders of technology provide ways to give all players access to a Game Master’s lovingly crafted and detailed world. Wikis, the ease of creating and sharing electronic documents and online services like Obsidian Portal  and Epic Words  can all provide players with the necessary information that splatbooks and supplements provide for published settings.
In Reality, It’s About The Group And The Play-style
It seems to me like I’ve talked about ultra-detail and never really said that its bad. That’s because it isn’t. IT ISN’T ABOUT HOW DEFINED OR DETAILED THE SETTING IS. Its about how the group interprets it and plays it out. If the group sticks to the canon without deviation, it can kill creativity. If the group uses the detail of the canon to support or flesh out character choices and provide a lush background, it enhances creativity. White wolf has been incredibly good about telling players to break the mold of their world and do whatever you want with it. This is written somewhere in every WW book, but I like the way that Will Hindmarch says it: “ ‘Here’s your guide to the game world,’ he says, ‘and here’s your box of matches.’  ” And I’ve seen something similar in almost every other roleplaying book I’ve read in-depth. Somewhere, someone says “Hey, do what you want at your table.”
In the end its about what your group wants. I know my group when it comes to World of Darkness. I know before getting into the game that they love them some canon. I resign myself to having long periods of time while people look things up in books. I bring my laptop. I also enjoy it when we get to take out the big bad, or the uber-organization and get to look in the book and see the exact impact we had on the well-defined world. There is something incredibly satisfying about saying you took out Pentax, as opposed to taking out that evil corporation that you didn’t really know that much about, except that they were evil and the Game Master said they were really powerful.
In a previous Eberron game that I ran, it was really satisfying for my group to take out the Lord of Blades and wage civil war in house Cannith, even though I ran the Lord of Blades and house Cannith nothing like the written supplements said. I incorporated elements from the books, and then molded them to fit the game that my players were playing. Having the supplements and information around was what made the game epic to them. Knowing they were affecting a world that was ultra detailed was what gave it that extra flavor.
Ultra-detail has its pros and it has its cons. Its all in how you use it at the table. So, what experiences have you had with ultra-detailed settings? Have they helped or hindered your play? Have they done both?