I think the part about that one campaign you guys did where you stayed in one city worked really well to illustrate the main point. The Forgotten Realms is huge and there is definitely is possibility of just getting overwhelmed with the sheer volume of available materiel, but it really is possible to confine your activities.
It was weird listening about the part of the show where you guys were talking about bumping into Elminster or Drizzt in Forgotten Realms, or Han in Star Wars, or something similar. I guess that I just have lucked out in the DM department and even thought the most recent campaigns I've been in have either been FR or SW that we never bump into those guys. The DMs that I've run with have all been able to make the campaign about the characters and not overwhelm us with the 'stars'.
In the FR campaign we never even got close to anyone with a book (or books) written about them. In one SW campaign we're playing in the era just prior to Order 66, and have met with the Jedi Council and therefor some of the more well known among them, but nothing major, and we probably won't be involved in any of the onscreen events from the movies. And in the other campaign we're in the older KotOR era, but are being trained on Dantooine with Revan and Alec, we're just about 5 levels behind them. We're likely not to have any part to play in their story unless we choose to and that won't be for quite some time anyways.