Confession time. I only just started playing Shenmue. I did not have a Dreamcast back in the day and I was only recently able to get my Dreamcast emulator working to a sufficient level to play the game without distraction.
Shenmue rocks! It does as good a job as any modern game (like Alan Wake) at creating an atmosphere. If it wasn't for the dated graphics, this game could come out today and still be groundbreaking. The characters feel real mostly due to their subtle and emotional reactions to events. I'm only six or seven hours in and I've only encountered a couple of over-the-top stereotypes. The rest of the characters are drawn as well as a modern Oscar worthy film.
The gameplay reminds me mostly of an old-school Adventure game. Talk to people, sometimes fight people, and play "minigames" between adventures. For me, the fighting is probably the weakest part of the game but its not terrible and the rest of the game more than makes up for any perceived weakness on my part.
The game feels open world though I'm definitely being guided down a certain path. But the world is so interactive and fully realized, it feels more open world than anything released at the same time. If you like Red Dead Redemption and any of the LucasArts Scumm games, this is like a combination of the two. You owe it to yourself to get this game working and give it a try.
This game runs great using the nullDC emulator though you may need to do a lot of tweaking to get it working correctly and it make take a slightly higher end system to run at speed.