For me, it completely depends on the main character's personality. If the main character has a personality that is similar to mine, I find it really easy to self-insert and experience the story as if I'm actually there.
However, if their personality, values, or reactions are completely different from mine, I naturally shift into an observer's perspective. In those cases, I treat it more like watching a movie or reading a novel, enjoying the protagonist's own journey and growth from the outside. Both ways of playing are really fun in their own way.