"In many ways, modern musical librettists have to cope with the same issue, even if they're not writing BRIGADOON or FINIAN'S RAINBOW. They have to convey a story in which the characters often relate plot points and information about themselves in a nonrealistic fashion: by singing and dancing. The audience knows, expects, and accepts this: they're at a musical. Just as the reader of a fantasy knows the setting is a world with magic. But the more the librettist fails to maintain internal consistency in his/her premise, the harder for the audience to suspend disbelief."
I agree completely, but I would make a big distinction between BRIGADOON and FINIAN'S RAINBOW in terms of the internal logic and credibility of the story. In the case of FINIAN'S, once you accept the fact that there are such things as leprechauns and magical pots of gold that grant three wishes, I don't believe there's anything in the plot that doesn't make sense within that world -- whereas BRIGADOON'S story really doesn't make much sense at all, as noted.