Functional and fun, with a "plausible" amount of semi-realism. Thing with realism is that it sucks, and nobody wants to play a game that sucks.
Realism is that space is... astronomically big. There is no better word to describe it. Things in space have passed from history to legend to myth before you see them (even the pro's don't get this quite right -- note that the center of our galaxy is roughly 50,000 light years away, give or take a few inches, so what is "about to happen" to that gas cloud acutally happened before we knew about using fire...).
Realism is that it takes years to get from here to the next planet, under ideal conditions. There is no way you could travel faster than light, and there is no way you could pass through a wormhole without being torn to pieces. Thus, there is no travelling farther than a few million kilometers from earth. Reality has it that there's such things as the Oort cloud (or similar stuff) that make leaving a solar system next to impossible. Reality also has it that most things in space are either insanely fast or insanely big (or both!) and will wipe you out within an instant if you collide with them. And, you can barely see them in time, if you can at all. This totally sucks.
Realism is that there is no sound in space. Yeah, that means you don't hear laser shots, among others. Your kick-ass hyperdrive and your planet-killer missles don't make any cool sounds either.
There's also no communication via radio in space, unless "space" means within a few million kilometers from home. Playing correspondence chess with your mate on Proxima Centauri will have roughly 8 years of waiting between moves due to the speed of light -- hopefully you're able to beat him in fewer than 10 moves! Now let's hope you're not having a long distance relationship.
Realism is that teleportation is not possible, and if it was possible, there'd be many logical and practical issues. But realism also has it that wasting 30 minutes of game time on board of a shuttle just to get to your ship sucks ass, and simply going whooosh is cool.
Realism is that lasers hit you before you see them (in fact, unless there is an interaction with dust or mist, you don't see them at all!). Which, frankly, totally sucks, as there are no countermeasures you could take. In particular, since reality has it that the slightest damage to your hull basically means you're dead. Which more likely than not happens if you destroy another ship too, from debris.
What people (even hardcore gamers) want is a game that is fun and challenging. Realistic? Maybe, but it still needs to be playable and fun.
That includes artificial gravity, faster than light travel, engines that go "whoosh", and guns that go "boom". And, of course, a way to instantly communicate with someone 30 light years away.
