Bedrockgames
I post in the voice of Christopher Walken
I read a short story in a collection recently that had lots of game terms in it, wow... it was painful.
On the other hand, the different groupings of elves in Tolkien, always, seems pretty natural. As do different fields of magic study in Earthsea and others.
I think part of D&D's problem, which isn't really a problem but more like something that makes this uniquely challenging, is it isn't a little general, not really built around a specific. I do think the language of middle earth works very well. One reaction I always have to Tolkien (and I am not a Lord of the Rings uber fan but I like to re-read it once in a while) is the langauge and world building. I also find Tolkien's prose very engaging and warm. I get what you mean on Earthsea. Personally I always had a bit of trouble with Le Guin's writing style (not that it was bad, just her prose technique, which seemed deliberate, created a bit of a barrier for me as a reader). I think what those have that D&D doesn't is, their settings, their stories, and their terms are pretty unified wholes. A lot of fantasy RPGs are like that, their mechanics are specific to one particular world. D&D might have default cosmologies, even default pantheons and settings, but there is always the understanding that those need to be generic enough or not interwoven enough, that you can for example cut out the pantheon and replace it with your own, play in a different world, etc. Every world, unless you revise the mechanics and core components, is going to have a certain D&D feel, but it is a longstanding tradition that you make your own setting. I think that is why diegetic stuff gets weird. It even gets weird when they try to create an in game lexicon sometimes (I remember hating "The Weave" when that first started showing up in novels) and I remember all the jumping through hoops when characters would talk around concepts like levels, spell memorization, etc and try to use other words or in world explanations for those things. My favorite is a conversation Victor Modenheim had with a magic user in a novel, think the title of the book was just Mordenheim. The character of Victor Mordenheim doesn't believe in magic, because he is a man of science, and they had to preserve that in the story despite him encounter a spell caster who visibly cast spells. So he started calling magic "The New Science".