Wonder Woman needs its element of fantasty...but there are definately ways to make it realistic and in the real world as well. All you have to do is look at shows like Buffy, Angel, Doctor Who, who have fantastical and science fiction based themes that take place in the so called real world.
Buffy and Angel never struck me as particularly trying to be realistic. Their worlds had a lot of the same forms as our world, but they just did that to play with them - to have nightclubs for demons and what not. Plus stylistically they were very self-conscious and spent a lot of time winking at the camera, which is drawing attention to the fact that they are fiction, and thus not realistic at all.
Theymiscra and the Amazons have always been seperate from Man's World anyways, that's the point of sending Diana as their Ambassador. You need to keep these elements as they're vital to the story you're trying to tell, removing Olympus from Diana's backstory would turn into a big mistake and piss off all the Wonder Woman fans. I'm thinking that the upcoming Animated DVD movie is a test to see what kind of interest there is for a live action Wonder Woman movie. LOTR was a historical fanstasy...Peter Jackson made a statement early into production (it might have even been during pre-production) that his intention was to make a historical fantasty. Breathe life into Middle World and make it real that way. You could do the same with Wonder Woman, Superman, and Thor. They all have elements of science fiction/fantasty but there are ways to keep them "real" as well.
Wonder Woman is historical fantasy as well. LotR is all about a "mythical age", Wonder Woman operates as a kind of time warp - Greek mythology transported into a modern age. It seems to me what Jackson is talking about is committing to the fantasy. Committment, believing in the world you're creating, no matter how fantastic it is, creates a depth that allows for the audience to suspend their disbelief. I would say that Buffy and Angel committed to their worlds, all the way down to the self-conscious style. It's possible to commit to any fictional construct and achieve a sense of belief, even without it feeling like "the real world". Middle Earth felt like a
real world, but not the