I love Justin Pearson's answer, as it is, indeed, all about context. I would summarize my own opinion as the following:
The extent of sound design stylization that suspends audience disbelief is directly proportional to the level of realism [see footnote] of the narrative, and the emotional content of the moment being underscored.
[Footnote: Realism is in the eye of the beholder, based on familiarity with the subject matter. If we all hung out with ninjas and serial killers every day, would swords and gore effects sound as stylized and still suspend disbelief?]
This generalization applies to entire films that aren't objectively realistic (such as sci-fi films) to more expressionistic or impressionistic (as opposed to representational) moments in films that lend themselves to moments of visual and sonic poetry, as opposed to more realistic or verite approaches to sound and picture. This isn't to say that this is a rule that can't be broken: It's broken all the time, often for comedic purposes, or to get all "meta" on it and remind the viewer that this is an illusion/film.