Popular science fiction often proffers the Holodeck vision for future immersive media: a seamless and transparent interface connecting users to a virtual world where they transform into a story character and influence unfolding events. In my dissertation, I offer empirical observations on a discussion that has been largely theoretical to this point. I explore the psychological concept of user engagement through an immersive and interactive story experience called AR Façade. In the experience, the "player" interfaces with an animated married couple through an augmented reality (AR) interface that allows for unconstrained body movement and speech communication. The player finds herself in the middle of a marital conflict and can influence how the social scenario plays out through her actions and statements. I have studied the AR Façade experience from the user perspective by conducting mixed-method investigations in two instantiations: our proof of concept lab demo at Georgia Tech and an eleven-week gallery installation at the Beall Center for Art and Technology in Irvine, CA. My thesis challenges the assumptions ingrained in the Holodeck vision by offering empirical evidence that immersive display technology both supports and counteracts the experiential pleasures sought by proponents of the Holodeck medium. Focusing on the experiential aspects of the human-computer interface, I examine how a media experience changes when going from traditional desktop interaction to immersive augmented reality. While the goal of many presence researchers is to strive for an "illusion of non-mediation", I conclude that explicit mediation may be required for reaching embodied narrative engagement. An immersive interface should be mediated to provide clear mechanics to support player agency (the feeling of empowerment over events) and allow the player to manage their distance from the designated character role. In the process of presenting evidence for my claim, I clarify the terminology across the stakeholder disciplines and present an empirical case study that spans media theory, design practice, and computer science.