Prince of Happiness said:
I think it's funny how dwarves seem to have Scottish accents nowadays, as opposed to the older German accents.
I've noticed that, too. All dwarves are now a bunch of short Scottish Vikings with axe fetishes. It's weird.
Our group uses a mixture of the three dialogue styles. We paraphrase and synopsize conversations with NPCs that aren't particularly interesting, or ones we can't justify spending that much time on. So arranging to have the horses stabled and fed will get "I ask the guy running the place to have someone look after our horses tonight" as readily as King Royalpants gets "We tell him all about what we did at the fortress, and make sure he knows that Duke Evilguy is probably still out there."
Synopsis also gets used when a character's much better at public speaking than the player is (or when the player just doesn't feel up to trying to make a speech). "I give an impassioned speech to the troops to raise their spirits and make them willing to give their all in this next battle. Later on, I tell the squad leaders about the wolves, and make sure they know what to do when the wizards up on the ridge start casting."
So we end up speaking in-character only for the conversations we think are interesting for some reason. If an NPC seems particularly cool, that might prompt more in-character dialogue. PC-to-PC conversations tend to be in-character. If the subject under discussion is one that's important to a character, the dialogue is more in-character than not.
And whether it's casual or pseudo-fantasy-ish really is a matter of taste. Personally, I absolutely HATE the way fantasy characters typically speak; it drags me right out of the game and makes the character seem shallow and phony. Fortunately for me, no one in our gaming group is all that fond of it, either, so I'm rarely subjected to it.
Sometimes I'll use exagerratedly formal phrasing for things to indicate that I'm being really polite, diplomatic, and/or snooty, but mostly I just say things in modern colloquial English. It's convenient, it expresses exactly what I want to express, and it lets me concentrate on the content of what my character is saying rather than get bogged down by trying to pseudo-medievalize it.
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if i could rattle off shakespearean blank verse more easily, i might feel differently
ryan