And suddenly you are not so much creating a fantasy setting as you are considering speculative, academic questions which lead to interesting pub or forum discussions but not much in the way of game-able content if you take it seriously.... And there's not only a lack of game-able content, but there's also a breakdown of play at the table, people arguing about whether or not a dragon would logically be able to do this or that instead of letting the encounter with the dragon play out. Or, if there is no open argument at the table, the player is sullen and withdrawn, explaining later (perhaps on a forum) that the unrealistic economics of the setting broke his suspension of disbelief. Clearly, the GM didn't calculate the amount of wine a community of 400 souls would be likely to produce and have for sale in any given week! And I choose to pout about that!
Take the example of the GURPS Fantasy campaign I alluded to in the earlier Blog Carnival post. The player who objected to the GURPS Infinite Worlds crossover and to reptile men as a standard race in the setting also objected to my using a by-the-book rule about the strength of iron weapons vs. steel weapons. Play stopped while he explained his expertise in ancient weapon-crafting techniques, then I said, "Well, I'm going with the rule as published." Because, you know, I was the GM, and I wasn't going to change a rule during play based on some other guy's opinion, which may very well be based more upon immediate personal benefit than on actual expert knowledge. Particularly since his argument was that iron shouldn't be inferior to steel, because steel replaced iron for shits and giggles, not because people thought it was better than iron.
It's basically the same problem as rules-lawyering, just with a different venue. The player wants things to go his way and uses an appeal to authority, whether it's the rules or mathematical calculations or scientific laws, in order to get what he wants. Nine times out of ten, he'll argue the exact opposite later. And if he's not arguing, he's sulking.
There's got to be *some* reference points, and some agreement on what they are. But if your communication is all about so-called realism and not about what the GM said is happening to the characters, you've gotten off-track.