[quote=@shylarah]
hm, I suppose.  But the sort of place you exist in, and grew up in, have huge effects on things like the way the character sees and interacts with the world.  A character from our world probably would be baffled if confronted with, say, an actual elf, or a person that can light things on fire by looking at them.  I guess it might not be more important, but I think the setting s always a character of sorts.
[/quote]
They're a significant impact on the characters, but they're never the focus point of the story. Also, I view this as something for the characters to overcome or adapt to rather than be moulded by. A weak-minded character would probably be racist towards an elf if they came from our world (if they didn't just think it was 'cool'), whereas a character of stronger mind would be more inclined not to judge them differently due to them being an elf, rendering the difference in races/setting meaningless to such a character. I'm the type of person who wouldn't really bat an eye if magic turned out to exist in our world, because my mind is always open to such a possibility.

Edit: I'll get back to the other topic when I've got time.