That sounds like you're describing dactyl nightmare. [1] I played a version where you were attacking pterodactyls instead of other players, but it was more or less identical. That experience is what led me to believe that VR would eventually take over. I still, more or less, believe it even though it's yet to happen.
I think the big barrier remains price and experiences that are focusing more on visual fidelity over gameplay. An even bigger problem with high end visual fidelity tends to result in motion sickness and other side effects in a substantial chunk of people. But I'm sticking to my guns there - one day VR will win.
It is precisely that! My version was wireframe and I can't recall the dragon, but everything else is exactly like I remembered it!
For me this serves as an example.
Few years later VFX1 was the hype, years later Occulus, etc.
But 3D graphics in general - as seen in video games - are similar, minus recent lumen, it's still stuff from graphics gems from 80-90s, just on silicone.
Same thing is happening now to some degree with AI.
I expect part of it is that the contemporary recommendations for VR are extremely meaty - something like 2160x2160 and 120hz with stereoscopic rendering meaning you're rendering every frame twice.
That's more than 1.1 billion pixels per second. At 24 bits a pixel that's something like 26Gb/s of raw data. And that's just in bandwidth - you also need to hit that 120hz of latency, in an environment where hiccups or input lag can cause physical discomfort for a user. And then even if you remote everything you need the headset to have enough juice to decompress and render all of this and hit these desired throughputs.
I'm napkin mathing all of this, and so I'm sure there have been lots of breakthroughs to help along these lines, but it's definitely not a straightforward problem to solve. Of course it's arguable I'm also just falling victim to the contemporary trappings of fidelity > experience, that I was just criticizing.
I think the big barrier remains price and experiences that are focusing more on visual fidelity over gameplay. An even bigger problem with high end visual fidelity tends to result in motion sickness and other side effects in a substantial chunk of people. But I'm sticking to my guns there - one day VR will win.
[1] - https://www.youtube.com/watch?v=hBkP2to1P_c