[In a sandbox], it is almost always, whatever is going on with [insert any element of the fiction introduced by the player], that is for the GM to decide. You only have control of what your character does. It is a valid style of play. And agency is considered to be your freedom to explore the setting through your character. That has been the standard understanding of agency in this context. It isn't even controversial I think. I am genuinely surprised to encounter the view I am encountering in this thread.
Well of course it's
valid. Who's questioning the
validity of that playstyle?
I'd be willing to wager that nearly everyone who frequents ENWorld has participated, in one fashion or another, in a campaign of the kind you have described. I've GM'd three different Savage Worlds campaigns using roughly the same basic social contract / GM principles you've outlined.
But to insist that this playstyle contains the farthest possible boundaries of available player agency is objectively incorrect. There are many systems/styles/techniques that offer more player agency than what is being offered in this style.
Look, if the tradeoffs for increasing player agency don't sit right within your style/techniques, or just aren't worth it to you, that's totally cool.
Maybe increasing player agency makes it too risky that your group's belief in the illusion of objective reality will be broken. Hasn't been my experience, but you're the one assessing the risk. Maybe increasing player agency makes it so that significant amounts of time, plot, and setting will focus on elements personal to the player's characters, and it's too risky in your mind that it'll turn off players in your group, because they won't be getting enough spotlight time. Maybe increasing player agency makes it so that you have to change your GM prep in ways that are too time-consuming, uncomfortable, or un-fun to you, up to and including changing systems---and you simply don't want to make those changes.
All perfectly valid reasons to continue doing what you're doing.
But how is it even controversial to say that Burning Wheel and Powered by the Apocalypse offer greater player agency than the style of play you're describing?