I suppose it all comes down to how one choses to define "arcade-like".
Time Crisis II had a story and cut scenes, as did Silent Scope 1 & 2. The entire Tekken and Mortal Kombat series' had epic plots as well (ok, no cut scenes, so more of a stretch, but still...). And let's not forget about Dragonslayer...
On the flip side, you have PC games like Phantasmagoria II : A Puzzle Of Flesh. That was a lot like an FMV version of Dragonslayer (to an extent, I'm not saying an exact analogue or anything). So was that arcade-like? Personally, I don't think so.
I don't think that story or cut scenes, or even epic feel have anything to do with being classified as an arcard-like game. I think it's all about the game play, which is the game engine.
In that respect, WC is arcade-like. However the story, atmosphere, etc do make it a truly great series (in fact it's my personal all time favorite, and I'm a big gaming nut in general
).
As to B5-like physics (which aren't 100% realistic, but damn close all things considered) in a sprite based game....yeah, you're probably right, it would not have been as much fun in general. Then again, maybe if everything else was tweaked accordingly..... Gamers were a different breed back then. WC1 had no virtual cockpit (thank god!), the MW series was actually based on BattleTech and as close to a mech _sim_ as you could get (unlike QuakeWarrior...err, I mean MechWarrior 4). Seems today people only care about great graphics, easy game play, and online gaming. Realism, story, and atmosphere are all secondary at best, unwanted at worst today. Back then however.....maybe B5-like physics wouldn't have been rebuffed.