I've never played an FMV game before. I'd be fun if someone could do something creative with the genre. I dont think they all suck, if I remember correctly 7th Guest was a well rated and highly regarded game.
7th Guest was regarded highly back then because it was one of the first CD ROM games (about 6 months before Myst came out) that wasn't outright terrible (like the Sherlock Holmes games) or a TG16/Amiga game with FMV bolted on top (like 95+% of TGCD games). It's pretty horrendous now, though, due to low resolution FMV, terrible acting even by FMV-game standards, and basic puzzles made tiresome due to endless animations. It was pretty amazing way back when but the awfulness of 11th Hour just highlighted the weaknesses of 7th Guest.
There were a couple clever FMV games like Psychic Detective but the problem with the "genre" is that FMV doesn't add anything that can't be done in other, more interactive ways. The tram ride at the beginning of Half-Life is basically what FMV games turned into, and these days most cutscenes are in-engine, sharing camera control with the player. The actual FMV segments in Alan Wake AN and BLOPS were striking in large part due to that transition. An FMV game could be made but the first question asked would be "why?", and aside from specific aesthetic reasons there wouldn't be a good answer.