The television screen is the retina of the minds eye.
Therefore, the television screen is part of the physical structure of the brain.
Therefore whatever appears on the television screen, emerges as raw experience for those
who watch it.
--Videodrome
I think this provides a clue to the Paradox of Fiction and the Paradox of Tragedy. We are moved by it, because it
IS raw experience.
I don't know that I agree with the proposed
mechanism of the screenwriter. People were captivated by poetry, campfire tales, and books long before the advent of the cathode ray tube. Television and film get immediate penetration, I think, because they are a direct seeing. To the eye it appears unmediated. You have to work a little bit harder to get the machinery running if you are, for example, reading a book (e.g., you have move your eyes across the page, form your own images, interpret sentence structure).
The mechanism, therefore, is us. We are simulators. Some art more easily engage the mechanism (e.g. VR, film, television, plays) than others (e.g., poetry, novels, oral storytelling). What kind of mechanism are we? Again, we are simulators and we live our lives in simulations. Here we merely need look to Kant's separation of phenomena (noumena, what we experience) and noumena (the thing in itself, which we never directly experience). Our brains are working overtime to turn over 7 millions bits of information a second into a "story" in our consciousness, connecting different parts of our brain and allowing executive features of consciousness to exercise control based on abstraction and prediction.
It seems real because it is real. Reality is, in a sense, simulation. Fiction is simply a simulation running on a simulation. This is the great "hack" of symbol-using creatures. We can use our simulation pumps (i.e., minds) to offer more than just an account of a facial expression in a potential enemy or an interpretation of movement in the bushes.
Arguably the paradoxes should come rushing back in at the point we realize that if we're controlling, to some extent, our simulators (i.e., minds), then we must know when we're simulating a simulation (e.g., consuming fiction). And we do. But we are only partially in control of ourselves and the better the story, the more "real" it becomes (the more we become immersed into a "reality"). This partiality also involves the incompleteness of consciousness. Let go of the notion of a Cartesian self sitting in some control room in the brain which is simultaneously aware of all things with self-transparent clarity, and replace it with a modular and blurry take on conscious experience and we can find that, indeed, to some extent, the left hand does not know what the right hand is doing when we lie to ourselves so as to simulate our way out of our mundane lives.
In short, for a sliver of our conscious experience it is simply "real" (conscious experience is not crystalline and Cartesian), it moves us, because it engages with our firmware for simulating reality. If your brain says its real, then it is real to you, at least for the moment. We are confronted less with any paradox of fiction and moreso paradoxes of reality (e.g., if all reality is a fiction, mere phenomena, then how can we speak of realities which underwrite them?) which vex philosophers.