I don't agree that sticking to canon is tremendously important, but I do agree that there are limits (both practical ones, and artistic ones), that it's not unimportant, and that there are a lot of successful products that don't follow it slavishly.
I can think of a few comics examples. In Spider Man, at least in the periods I'm familiar with (more-or-less from the beginning through to the early 90s), there were a series of plots on more-or-less permanent rotation: Aunt May would have a heart attack, or be kidnapped, or marry Dr Octopus or Mephisto or whomever, etc; Peter would flirt with Mary Jane, or even get together with her, but then they would break up (often for Spider Man-related reasons); etc.
There's a reason these plots recycle: they arise naturally from the characters as presented (both theme and backstory), and most of those who are reading this year's Aunt May crisis or MJ on-again/off-again romance weren't reading the version that ran 2 or 5 or 10 years ago.
But if I was running a Marvel Heroic game, would I make all this stuff part of the backstory of Spider Man and co? It would be ludicrous - a bit like the Hardy Boys being perpetually 17 and 18 and fitting dozens of mysteries into their school holidays. Stuff that makes sense in serialised fiction with stable characters and a generally changing readership simply can't hold up when it is supposed to be all held true all at once. You have to pick and choose what to focus on and what to let go. (To my mind this is part of the strength of the X-Men movies - they capture the themes and basic character elements terrifically, but without crowding out the essentials with nonsense crud which is simply the result of the need to publish a new 20-something pages every 4 weeks.)
Another comics example is the Maddy Prior factor in X-Men: Claremont recycled the name Maddy Pryor (taken from the English folk singer) and it ended up being stuck on a major character. The earlier use in Avengers Annual 10 (I think - going from memory here) is best just disregarded.
Besides LotR, it's hard to think of a bigger influence on D&D than REH's Conan (I guess Leiber and Vance are the other candidates). But it's also hard to think of a collection of fantasy stories with a common protagonist to which canon could be less important. The Hyborian Age is a self-conscious amalgam of a range of times and places from Earth's past, but imagined rather than real, and hence freed from the constraints of historical consistency or fact-checking. In REH's stories Conan is wherever and whenever the author wants him to be for literary and imaginative purposes, and the world can be the imagined Near East of Zamora and its spider-haunted towers (the paradigm of sword-and-sorcery in my book), or the feudal lands and cavalry of Poitan, or the idealised frontierfolk of Beyond the Black River.
Of course it's fun to draw up Conan timelines, and to try and fit it all in and make it all make sense, but ultimately it's like trying to work out how Frank and Joe Hardy fit so much adventure into a dozen or two weeks of holidays: pointless, and missing the point.
