[never played GTA3]
[played GTA2 for about fifteen minutes total, and felt that it was a ripoff of half a dozen better games]
If I wanted a game to be set in, say, space, would I be wanting it to be another System Shock or Doom? There's kinda a difference, y'know. And the "collateral damage" isn't the only drawing point, it's just a bit of nonlinearity for when you start feeling bored and sadistic. In other words, a perk. The city setting allows for freedom of movement that being in some hole in the ground doesn't.
Besides, I like sniping in my shooters, and how do you do that without rooftops? Or windows, or something else that puts you a fair remove away with a wide FOV, at least.