I don't know why you say "the players talking in character" is not resolution via the fiction. When a player talks in character, they produce a bit of fiction. When another player responds in character, they are taking that earlier bit of fiction and building on it.
I mean, suppose that someone who didn't know the group was RPGing walked into the room, and heard one person telling another about how they're going to lend them a sword so that the borrower can get revenge on their nemesis. And the walker-inner expresses shock that these people are sitting around casually planning a murder! The players explain, "No, we're just roleplaying, it's pretend. That wasn't us, it was our characters talking."
That's fiction, and shared imagination.