Just to add to this:I was told quite clearly that it was impossible for the players to explore the world if the players have any hand in how the world is designed. It is impossible to have a living breathing world if the players can directly influence the world as opposed to indirectly through their characters.
My argument is that the “living, breathing world” is a fiction.
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There is no such thing as a “living, breathing world”. This is just a convenient talking point. The notion that you cannot explore a collaboratively designed world is ludicrous. There are a dozen games out there that easily disprove this. Fate, Blades in the Dark, I’m sure there are many more.
When I started my Torchbearer game, the first thing we did was build PCs. Each PC in Torchbearer has a home town, chosen from a list of around 15 settlement types. One of the players decided that his Dwarven Outcast, with Explosives-wise, was from a Forgotten Temple Complex. I'd already told the players that, in terms of maps/geography, we were in the Bandit Kingdoms-Tenh-Theocracy of the Pale part of Greyhawk, as that seemed to fit the "northern" vibe of Torchbearer. Looking at the map, I asked the player where the Forgotten Temple Complex was and he said that of course it's in the Theocracy of the Pale. I asked what sorts of gods they worship there and he said "Gods of explosives! What else did you think?" or something very much along those lines.
The same player also chose, during the relationship building phase, that his PC was an orphan but had a mentor (in the Temple Complex), a friend (an alchemist in the Wizard's Tower that another of the PCs came from) and an enemy (a rival in the Complex, who cheated on the exams and hence pipped the PC to a lucrative post, thus leading to the PC being an Outcast).
In a subsequent session (the fifth, maybe?) this PC was in a tavern at the Wizard's Tower and so I rolled on the Tavern Rumours Table, which told me that he heard an unhappy story about his parents. Now, being an orphan, how could this work? So I told him that one of the old-timers in the tavern told the PC a story about how his alchemist friend seemed to always have had Dwarven friends. Why, only 40 or so years ago, a Dwarven couple had come through town and stayed with the Alchemist, and they were expecting a bairn!
The player has mused on this, but hasn't yet had his PC try to find out what happened to his parents.
A little later, prompted by a friend talking about playing through the Temple of Elemental Evil, I decided to convert the Moathouse to Torchbearer. This required thinking about a Temple of Elemental Evil, and our game already had a Forgotten Temple Complex associated with explosives - and right near a swamp (the Troll Fens) just like the moathouse is. In our most recent session (the twelfth of the campaign, I think) the PCs were reading books of lore in the Tower of the Stars, and read something that talked about a "forgotten temple" whose members regarded the Void as an admixture of elemental earth and elemental air. The player of the Dwarven Outcast turned to me and asked, "Is my temple complex full of nutters?" and I replied "Well, they worship the god of explosives, so what do you think?"
Now from my point of view I feel like I've just described a world as living and breathing as any other. With background lore, hints of mystery, NPCs who know and care about one another and the PCs. And at least one player who cares about it all too.
And in this post I've fully described the process of creation, including the respective roles of the players and the GM.