Town, outside, and dungeon represent decreasing levels of safety. In most games, players want a clear indication of how much danger they are in just walking around. Some games, like Dark Souls, do blur these lines. I think it would be easy to go overboard.

This strikes me as one of those things that sounds better on paper than in practice.

I think Dark Souls is not a fluke, it shows that when executed well (which very may be hard), it is additive. It makes things feel more organic.

From article : "Maybe one cave system has a place where it connects to a dungeon, which connects also to a basement in some guy’s house in the middle of nowhere."

This just sounds better than having the black and white delineations between spaces. Yes!

Safety can come from control over the world though. Consider Minecraft and Terraria (especially older MC), where monsters can spawn in most areas outside some minimum radius from the player. Neither is particularly "scary" because they give the player straightforward ways to control the situation. In fact, monster spawning leads to a lot of emergent gameplay in them.