I love live music, I bet you do too. Even though I would like my home system to replicate that experience, my system seems to be missing something. So here go some questions for you:
Part 1: Is that "Live" sound a key reference against which an ambitious system should be judged?
Part 2: How is an actual "Live" performance different, in a technical sense, from what most home systems can reproduce?
Part 3: Is "Live" sound even worth chasing? What happens when the dog catches the car?
I'm not sure anyone can pronounce what the goal "should be" for our audio systems. But for me...
I do reference the sound of live, unamplified voices and instruments as a sort of "north star" by which to evaluate the sound of what I'm hearing.
Something that points in the right direction, but which you never actually reach.
I do this because live un-amplified sound (and often amplified sound) is to me usually leagues better than reproduced sound. And because I find that some sound systems get a bit closer to reminding me of the real thing than others, and I enjoy those systems more than ones that sound consistently "wrong."
But that said, if I focus too much on the comparison, and demand too much, it would only result in disappointment. The reproduction doesn't really sound like the real thing in every way, and in some ways it hugely departs. (A drum set playing in my room each night would blow my ears out).
So in terms of the realism part, I use an analogy to watching movies on my projector. Some movies strive for realism, others do not. For those that strive more for realism, certain reference points to real life increase the realism - the acting being natural, the script sounding natural, the lighting not exaggerated, the sound, the locations, and technically things like skin tones being accurate enough, all of those things help the illusion of reality. They help you forget the ways in which the experience fundamentally departs from the real thing (e.g. the big flat image among other things). Since no movie experience is truly realistic, but consists of illusion that references just enough reality to aid "belief," a better word that captures the experience is "believability." A movie can't be "real," but it can be "believable."
The same goes for my sound system. I was listening to one of my favorite soundtracks - orchestral - a few nights ago, with my eyes closed head back on my sofa. My speakers are set up wide apart and fairly close, for an enveloping sound. The speakers "disappear." While there wasn't a true tonal richness of a real orchestra, there was a general "rightness" enough to let me luxuriate in the sound, and it was actually surprisingly easy to sink in to the illusion of listening to a real orchestra. Like watching a movie, if I stop and think about it compared to the real thing, it will instantly be revealed as falling well short. But with the right bag of tricks tugging the right bits of my brain, and my imagination aiding, the believably was quite rewarding.
And then there is all the music that I listen to that is not trying to sound "real" in any sense. I just want that stuff to sound great, and compelling to listen to. Fortunately, the features that make acoustic instruments sound more convincing also work for the crazy electronica I like to listen to.
Just like an oboe can sound RIGHT THERE between the speakers sometimes, a crazy synth line can appear RIGHT THERE, like a column of dense, writhing reach-out-and-grab-it texture. I often liken listening to electronic music with speakers in my room that do tight, dense imaging, to having aliens show up and visit me in my room. It never ceases to fascinate me.