The campaign setting was specifically designed to be rough-n-tumble. I have another "civilized" continent (Shelantry) to the west that has never entered into gameplay. The Gods in my current game are ones that took hold on the "wild" continent (Abbathia, where my game takes place) when settlers first came over fleeing the rigors of civilization. When the "civilized" continent devolved into mage wars during a time of high magic, a number of the wizards fled eastwards to Abbathia - and the war followed them there. They made peace for a time, but things broke down once again, and many of my campaign's dungeons and artifacts are relics from that earlier era. For reference, Ioun was considered one of the weakest and least politically competent of the Archmagi, and as far as the group knows he's the most powerful wizard alive on the continent today.
Sialia had some of the details a little off. My first campaign was set about a hundred years previously in and around Corsai, back before I added much style to the place. It lasted about 3 years of weekly play, and had a smaller scale than the current game. The locations have overlapped, though.
For instance, the place where the Aeotian church's Army of the Sun is now fighting the Necromancer Kings is the same meteor crater where the old game's devilworshipping chief campaign enemies were placed. (I didn't rewrite history with the new campaign; the new inhabitants slaughtered the old inhabitants.) Over the years I've had a few "easter eggs" from the old game, including some magic items and PC cameos.
Pkitty said, in reference to the Sir Ghouleax situtation, that he doesn't Schrödinger so much. Everything happens for a specific reason and its laid out in advance.
How much about Spira do you have worked out? About its past and future? Do you keep things deliberately vague in your mind and notes and just add in stuff as it's nessessary?
Graf's question is an interesting one, and worth pulling back the curtain for. I never make up anything that I don't specifically expect to be brought up in the game. Huge sections of map? Blank, spotted with a few generic cities, until those cities become Plot or someone heads that way. Huge sections of history? Undefined and amorpheous, until the history becomes relevant. I find that if I try to make this stuff up out of context, I get bored and the material gets boring. Far better for me to do it dynamically.
I seldom "Schrödinger," in that I plan for specific eventualities in the game about 2-3 games out, and I know what the bad guys are planning with any ongoing plot. Those plots usually advance regardless of character involvement, but are changed by the PCs getting involved. For instance, if the Defenders hadn't taken out the ghouls and the necropede at Hundle's Crossing, I have a pretty good idea of what that army would have done. But I'm not bothering to worry about what is happening in Velendo's home town, unless and until it becomes relevant to the plot. I think that's probably a weakness as a DM, but I find it helps me keep my eternally multiplying plot threads under control.
The trick is making sure that this is never evident to your players, and that you are rigorous in keeping internal consistency with what you've already decided. I may not know what's down in unmapped territory, but I have a general idea of something cool that can hold the PCs' attention long enough to map out everything else around that area. Likewise, I know enough about my world that if the PCs question someone who I never expected to have a speaking role (as they did the other week), I know their motives and what they would be aware of.