If the players have no effect on the game, they might as well just ignore the game entirely ...
You are probably slightly wrong here.
Players don't always play for the purpose to see their plots taken into the written Settings documents. They play for the purpose to have fun playing.
And it would be wrong to say that nothing which was played ever found its way into the settings. Do I have to tell you where "Joopiner berries" and "Fried Roltoks" came from? Now they are food which can be crafted by players. Even though it is not usual, it happened. But it always requires a responsible Settings developer who gets convinced to agree to its implementation.
I still hope that the "Cumbana" and some of our "favourite drinks" (e.g. the "Cave Rill") have a chance...In one point you are just right, though -- in my humble opinion:
The life in a multi-player game is created by the players playing it, and by the characters living in the virtual world. Similar to the languages which are what the people say who speak them.
There may be verbose language dictionaries, like the "Oxford" for English, or the "Duden" for German. But they are just what the "Settings" are for the game: A more or less confirmedly correct set of rules and facts about a current state of a system in development.
The people using the language by speaking it develop the language, even though they may not be able to edit a chapter in the dictionary directly. But sometimes the publisher decides to edit it, according to the development of the culture.
The people using the game by playing it develop the game, even though they may not be able to edit the Settings directly. But sometimes the Settings developers decide to edit their documents, according to the roleplaying they witness.
