Yeah, I was going to say what Mike said.
This is what I meant by resolution. The organisers defined the high-resolution scope of the setting (the overall map and realms, usually with some input from players) but players could at any time fill in grey areas at the low-resolution level on the map so long as they did so in a manner consistent with the established setting. So a PC could add a small town, but not a big city because PCs should already have known about it. They could invent a local guild house, but not a whole national guild (unless they were attempting to found a new one, which one player did).
Players usually couldn’t invent a race of people, because others would have already heard of them. One player who was keen to play a centaur was diverted into playing it as an NPC, and a consistent explanation invented for where it came from. If a group of players had come to us wanting to play rat-people, we may have considered it but would have wanted to know why no-one had heard of them until now. Even then, I would have discouraged them, because the existing races had existing relationships so they had existing reasons to interact.
Separately, we also didn’t allow stuff to be added that was obviously derivitive from a specific other setting.
There are three questions here I think:
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Is the addition something that PCs should already know about? So how is it appearing out of nowhere?
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Is the addition obviously borrowed from a fictional source in a way that is offputting?
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Will the addition diversify the setting in a way that splinters it, reducing the likelihood of interesting interaction?
A closed world avoids these questions by only allowing players to add to the setting with a limited scope.
Rules are a separate thing entirely. We’re talking about closed and open worlds here. The world is the setting, not the system/rules. As Mike says, we took a lot of input from players on rules. We even had an organiser/player focus group before doing a major revision.
EDIT: Added third question.