Iron Crown Rebellion
Iron Crown is a medieval campaign setting set in the Astral Plane. The Astral Plane is a fantastical place of thought and magic, and Iron Crown takes that into account. The inhabitants of Iron Crown are more sophisticated than your standard Dungeons & Dragons villagers. The average citizen understands basic planar cosmology like medieval villagers would understand varieties of flowers or types of trees. Inhabitants encounter mundane and powerful magic on a daily basis, and thus know it when they see it, and know how to react to it when it happens to them. A fireball is about as frightening as a car crash, but no one goes insane from the occurrence.
An example of magic in everyday life can be found in Iron Crown law enforcement. The marketplaces are patrolled by invisible members of the Magical Threat Authority (MTA) with permanent See Invisibility cast upon them so they can apprehend invisible thieves. Guardsmen rely on tanglefoot bags and globes of Glitterdust to apprehend criminals. Mages are sent out to capture those who use magic to disrupt society and various other experts are often hired to maintain or restore order.
Iron Crown takes the D&D rules as the baseline of what is normal. As Monte Cook describes his campaign setting, Ptolus, “If the rules suggested that something might happen a lot, then in Ptolus, it happened a lot.” Nobody is surprised when a wizard casts magic missile in a bar fight, although the MTA might have something to say about it. A lion-man (litorian) walking down the street or a druid with a mountain lion animal companion is nothing strange to these people. Animal companions, golems, paladins riding elephants, flying monkeys and all manner of strangeness are barely given a second glance. There are rules, of course, especially rules regarding how D&D type stuff is used in an orderly city, but the fantastical is mundane.