What component is responsible for dynamics ?

Much as I appreciate the very best high-end audio can do, it cannot and will not ever be mistaken for a live performance, even in a world class system set up correctly in a world class space - one could tell the difference instantly.

Learsfool, context plays a huge role here. If you are at home, you know already that there is not a symphony orchestra in the room. So you won't be fooled no matter how good it sounds. But what if you are at a recording studio? In this case it is reasonable to expect live musicians playing instruments live. In such a context, a good system can fool you easily!

Imo, even that premise is relative. I have no doubt there are recordings that if they can't fool you just because you know they are, you will still conclude it sounds real. I happen to have one.

I will add that this ability is far more dependent on the recording than the gear.

I would have to agree with Csontos, Atmasphere. Even in the recording studio, it is very easy to tell the difference assuming we are listening to particularly wind instruments or the human voice. Even stringed instruments and some of the percussion should be fairly easy, assuming no amplification. Now if you get into electronically produced sounds, then yes, I agree in a studio you could be fooled.