To me, gonzo is not the addition of the fantastic, but the addition of something incompatible with the setting. Including mechs into Dragonlance (which I've experienced) drastically takes away from the game, since the DM usually doesn't consider the ramifications of doing so. The focus of the game becomes less about the setting than it does the unusual feature added.
As for the original discussion, I prefer to have the fantastic and amazing be reserved. Characters may have some unusual powers (such as spellcasters) which are both rare and distrusted by normal people. Fantastic items are rare and precious, usually having a downside as a cost for their use. Creatures might be somewhat common, such as humanoid creatures like orcs, if the setting allows for them, but magical or mythical creatures are rare enough to be unknown to most except in stories.
As for the original discussion, I prefer to have the fantastic and amazing be reserved. Characters may have some unusual powers (such as spellcasters) which are both rare and distrusted by normal people. Fantastic items are rare and precious, usually having a downside as a cost for their use. Creatures might be somewhat common, such as humanoid creatures like orcs, if the setting allows for them, but magical or mythical creatures are rare enough to be unknown to most except in stories.