Odly enough, they seem perfectly accepting of an underwater super-race with mecha, lasers and other ultra advanced tech, but don't feel right about any steam technology they encounter, even though I've already established that the setting is steam-punk merged with medieval fantasy.
I think it's to do with how overt the fantastical is. If the fantasy elements are really in-your-face, and make no bones about being impossible, then players will just accept it as part of the fantasy. However, if it looks plausible, but one or more players
know that "it doesn't work like that", then you potentially have a problem, because then the fantasy is fighting against their real-world knowledge.
Any way I can have the players accept the level of technology, rather than having them say "This is high fantasy, so that shouldn't be there"?
I think you can help matters by making sure the steampunk stuff is built very clearly into the setting. So, don't have the PCs occasionally encounter steampunk stuff - have them encounter and use it all the time - from the steam-powered carriages, to the streets lit by gaslight, to the printing presses, and so on. That way, it becomes just a matter of set dressing, and hopefully accepted.
And then, when you do need to introduce some out-there steampunk monster, or difference engine, or whatever, it is just an outgrowth of the technology they've gotten used to encountering.
I can suspend my disbelief with fantasy because, hey, it's fantasy that's what you do. I can suspend my disbelief with a lot of science fiction but there's a point where it shatters. i.e. I could accept a time traveling dude that switches bodies on occasion but I could not accept a Great Britain whose nuclear arsenal could not be used unless the United Nations deigned to provide them with the necessary codes for launch.
For me, it was the "universal roaming" on the mobile phones that really bugged me. My job is in consumer electronics, with an emphasis on short-range wireless. I
know how mobile phones work, in almost sickening detail. And so, when the Doctor japped the phone with his sonic screwdriver, and declared that it now had "universal roaming", that created major problems for me. I don't care what magic wand you have, those components
cannot do that, and
cannot be made to do that. In order to do that, he would have had to fundamentally alter the physical makeup of the phone, or rewrite physics around the phone... and if his sonic screwdriver can do that, then the rest of the story becomes meaningless, because any and all threats become trivial.
(Conversely, had he instead taken the sim card out of the phone and put it in a
different phone, preferably a suitably futuristic-looking one, that
wouldn't have been an issue. Because as soon as you do that, you're tying in to sci-fi tech where all bets are off. But the juxtaposition of the two,
that was an issue.)