The last quoted sentence seems as good as any to describe what is going on.
"Everyone is involved in establishing the game world" is the description you think is best? How is that not worldbuilding?
I think the current usage of "worldbuilding" in discussions of RPGing brings with it an assumption of GM authority over that process. I think this is very evident not just in many of the posts in the current threads, but other threads one reads on ENworld, blogs one reads, presentation in D&D rulebooks, etc.
It's also very often taken for granted, in RPGing, that a "gameworld" is more-or-less independent of any particular group of players or characters - which relates to the idea of "neutrality" that has been put forward by more than one poster in these threads. The process you describe for City of Mists does not produce a "neutral" setting.
I think the criticism is for a specific type of worldbuilding, with the GM as the sole or heavily primary authority on the world details to be used in the game. I realize that my use of the term is far more broad. However, I think that broader definition is far more suitable overall, and I do think it aligns with a less RPG specific version of the term.
I think that many settings are put forth as neutral, that's true. But I don't think that must limit player agency. It depends on expectations. I share your preference of having characters that are heavily invested in what is happening in the game, and tied to the events that are going to come up. But some players don't want or need that.
So in this sense, the expectation of agency is the deciding factor. You expect more agency for the players, so if a game does not have that, then you will likely not be satisfied with it. I can understand that. I don't know if I would therefore draw the same conclusions about the game system or style of play that you draw, but I can understand your preference. If you think that worldbuilding tends to limit agency, then I can understand your concern. I don't think it is nearly as ubiquitous as you put forth, but I can understand the concern.
But if you did not expect much agency....if it was a casual game that you joined on a whim, where everyone was playing a premade module or what have you, and gave little thought beyond their character other than class and race....you'd likely be fine with whatever agency you had. (I realize that you would likely not join such a game, but let's consider this a general "you")
The expectation on the part of the player is aligned with what the game offers, in which case, nothing is being denied.
If I have two kids, and one wants 4 scoops of ice cream, and the other only wants 2, I am not denying the second kid anything when I only give him 2 scoops.
This description seems to be of a game that broadly conforms to
the "standard narrativistic model":
One of the players is a gamemaster whose job it is to keep track of the backstory, frame scenes according to dramatic needs (that is, go where the action is) and provoke thematic moments (defined in narrativistic theory as moments of in-character action that carry weight as commentary on the game’s premise) by introducing complications. . . .
The actual procedure of play is very simple: once the players have established concrete characters, situations and backstory in whatever manner a given game ascribes, the GM starts framing scenes for the player characters. Each scene is an interesting situation in relation to the premise of the setting or the character (or wherever the premise comes from, depends on the game). The GM describes a situation that provokes choices on the part of the character. The player is ready for this, as he knows his character and the character’s needs, so he makes choices on the part of the character. This in turn leads to consequences as determined by the game’s rules. Story is an outcome of the process as choices lead to consequences which lead to further choices, until all outstanding issues have been resolved and the story naturally reaches an end.
Now given that it's a PbtA game, I suspect (without having read it) that the emphasis on scene framing is less than in the standard narrativistic model. But I think in the context of this thread that's probably a minor point. I think the difference between what you describe, and a traditional GM-heavy-worldbuilding game, is fairly striking.
Sure, there are some differences that are striking. I don't know if they need to be as great as you may think. There is nothing that prevents the GM from introducing secret backstory. The book uses an example that continues throughout the rules and it's very clear that the GM is expected to do exactly that. Yes, the material the GM introduces is expected to connect to the themes and ideas established in the Exposition Session, but it still allows for it. But I don't think that this fact will wind up limiting player agency.
But what about my comment where I said this is exactly how I've been running D&D for many years? You clipped that off when you quoted me, but I'm genuinely curious for your take on that.
Why can't D&D be played with an initial session where everyone contributes characters with goals and then world details that fit nicely with those goals and the themes that seem to be generated as a result? 5E's game mechanics are not strongly designed with this in mind, but the Bonds, Flaws, and Traits can really contribute a lot in this way. And then there is no real limit to what you can do as a group independent of the mechanics.