The rules say I can inflict a penalty on your character, and (incidentally, in the course of doing so) I narrate the fictional cause. A lot of 4e critics see a lot of this in 4e. (I think some of them are wrong, because they're ignoring the keywords, but that's a separate discussion). In this sort of system, the principal arrow is cube-to-cube ("I made my roll - now you've got to suck up a -2 penalty"). We don't need to invoke any clouds to keep playing. Establishing the fictional explanation for the penalty is incidental, and nothing else follows from it. It hangs there as mere colour.
Yes, you don't NEED to invoke any clouds to keep playing---but there's potentially some very good reasons why perhaps you should. I've long ago made my peace with the idea, but just so you understand, you're going to get massive pushback from "dissociative mechanics" proponents on this, who would tell you that establishing fictional explanations like this is not in any way "purely incidental," that any number of in-fiction elements can and probably should follow from it, and as a result is much more than "mere color."
Perhaps I've missed something, but isn't this about the game rules, plus how particular actions are framed?
Eg, consider the following episode of play (sblocked for convenience):
(snip)
Okay, so, what to make of the (snipped) example? As a GM, I could tell you were trying to "Say yes!" to the player, were trying to use the 4e powers/page 42 stuff to make a reasonable judgement call, were trying to let the resolution play out according to the player's stated action intent.
But bottom line, it was for all intents and purposes a case of "Mother, May I?" with a few rolls by the player interposed. There's no explicit rules in 4e that says you can allow players to expend healing surges to modify the fiction. And if you were willing to allow them to expend healing surges as a way to codify the properties of the spell he was casting, why make him roll at all? You're GM-fiat-ing the crap out of the scene at that point, what difference does it make if you just allow the player to win?
However, I'm willing to admit that this kind of thing may simply be endemic to high-level D&D play. To play the part of a demi-god PC, you have to be able to do demi-god-like things, which is pretty much rewriting the rules of physics and the nature of existence on the fly. This is probably the reason why I have historically had ZERO interest in high-level D&D play and "planar travelling" storylines---because inevitably it ends up as a weird mish-mash of GM fiat mixed with high-powered spellcasting and magic items that has no real basis in what I consider to be interesting explorations of the human experience.
Boiled down, I think the diagram in the OP could actually be simplified as follows:
1. Cube output => Cube input
2. Cube output => Cloud input
3. Cloud output => Cube input
4. Cloud output => Cloud input
Or, read in plain English:
1. A mechanical output informs a following mechanical input.
2. A mechanical output informs a following fictional state input.
3. A fictional state output informs a following mechanical input.
4. A fictional state output informs a following fictional state input.
And it seems to me that we're actually moving to a consensus that RPGs as systems only care about States 2 and 3. In State 1, if the mechanics don't inform the fiction but only other mechanics, they have no real meaning until State 2 is reached. If there is no State 2 transference, we aren't playing an RPG. Interestingly, I'd imagine that most of us are actually okay with keeping a certain amount of information in State 1 for a certain period of time before moving to State 2. I think "D&D"-style hit points live in State 1 much of the time.
As a side note, I do get what you're saying, [MENTION=42582]pemerton[/MENTION], about hit point loss not being
intrinsically tied to the fiction. In much of the "middle parts" of a D&D fight, characters may have lost say, 40% of their hit points, but based purely on what those characters are still capable of doing, we wouldn't know the difference. Those characters are still acting normally, using all of the powers at their disposal, suffering no debilitating effects, etc. There are cases all the time where marking off 15 hit points from my character sheet creates no real impetus for me as a player to reevaluate what's happening in the fiction. The one caveat to that is we have to assume that on some level, in the fiction, a character has some awareness of their own general state of health, fatigue, willpower, etc., that correlates to their hit point total.
The polar opposite of State 1 is State 4, where system is meaningless. State 4 simply ignores an RPG's rules to inform the fictional state. For example, if a player decides their character is married, that output informs the following fictional state inputs that A) society probably expects the PC to remain faithful to that spouse, and B) should the character violate those in-fiction norms, there will in-fiction consequences. Likewise, the same is true if a player convinces the GM to give a player a fancy +4 magic sword, even though there's no treasure parcel being handed out and there was nothing of the kind to be found in the GM's random treasure rolls. Previously the character did not possess a sword in the fiction; now they do, and that output must inform following fictional state inputs (i.e, "Where'd you get that sword, bub?").
The real dividing line is State 2. For some, State 2 is only acceptable via adjudication of individual character inputs. For others, State 2 is perfectly acceptable via direct narrative control. And along that continuum lies the heart of what we would call a "traditional" RPG game, and what we'd now call a "narrative story" RPG.