I agree with you, there are great sidequests which find their place in the setting, they allow to take a short break from the main quest and renforce the impression there's a whole world living around the player.
With contracts and treasure hunts however - I was being generic by calling them "sidequests", after a while it becomes less focused on the world and more on leveling up or gearing up, and it dilutes the experience too far for some players (hopefully there are players to enjoy them as well).
Perhaps a game can't be an RPG without the unavoidable "kill the rats/spiders in the basement" quest
