I'd prefer plausible amounts. For me it's one of those things where it doesn't benefit from a gameplay/realism balance, since unrealistic amounts just end up being goofy-looking. It was weird in Oblivion when bodies never show the slightest scar while blood-stickers get scattered around, but I don't want body parts flying around either. People really tend to underestimate how difficult it is to remove a limb; you don't just cut someone and watch their head go flying, as gets periodically suggested. As far as "decoration," I'd prefer the same level. It has the best effect when it makes sense. Necromancers would presumably have some corpses around, bandits might put heads on spikes to keep travelers away from their hideout. When you're building the scenery out of organs it just looks ridiculous. If those body parts are around in a realistic level then it will properly impart a sense of danger when you enter somewhere and find an unusually large amount of gore.
As far as the realism goes, that also means gorier stuff is possible, but kept to situations that deserve it. Nobody just exploding mid-combat, but when a werewolf grabs your ally and rips his arm off, you know it's time to start running.
No, I do not want to play a level about Al Gore.
I do, however, want to animate a creature made of wood and name it Al Golem.