Lanefan
Victoria Rules
If you are the setting's creator and nobody else is really going to use that setting other than you and your players, then your word is law no matter how you present it.It means this. If I am a game creator, I have lore for the game. All that remains is how that lore is given to you. I can decide to give it to you through a narrator, creating the canon lore that way. I can also decide to give it to you directly, with no narrator, creating the same canon lore. There is no difference in the canon lore imparted by the two methods. Changes made to narrator canon have the same meaning and impact as changes made to direct canon.
However. As soon as you put that setting out there for others to use, who may or may not know or care what you had in mind when designing it, it doesn't matter how you present your lore - the chances are near-unity that said lore is going to be messed with. With any published setting it's up to each individual DM/table to decide what bits of it they're going to keep, what to trash, what to expand on, and so forth.
Further, there isn't (or IMO certainly shouldn't be) any expectation for there to be any but the very broadest consistency between tables/DMs/campaigns based in the same setting.* If you've just left a FR campaign where Waterdeep was blown up and the Moonshae Isles drifted with the tides instead of staying in one place, and jumped to another FR campaign you've no reason at all to expect wandering Moonshaes even if that's somehow a vital element to your character design. One DM might hew close to Greenwood's original FR and include only those changes he makes. Another might use the 3e hardcover version as written. A third might use gray-box, only without Waterdeep and with wandering Moonshaes. They're all FR, and like it or not neither Mr. Greenwood nor WotC/Hasbro - nor me, nor you - can legitimately say otherwise. And the best thing? Nobody is doing it wrong.

* - except in those wonderful instances where two or more DMs share a setting or universe.
Lan-"now I'm wondering how many xp a wandering island is worth"-efan