I do try to deal with it IC but then it starts a 4th wall tidal wave and in some ways it exacerbates the situation.
Ultimately the responsibility is on players and there should be no blame for the code or the admins (in most cases). One thing I try to do now and then is respond to vnpcs, incorporate vnpcs in my emotes, talk about imagined situations, and world-build a little.
By not treating everything as literal (ie: 2 players in a room "Man its quiet in here tonight" when the room description says crowded) its a small step in the direction to reversing the small world. Another example - "Sorry I can't hear you, come over here," -- creating positioning and dimension. Or Hugz turns to greet a familiar face as they clap him on the back and then tries to hide his disappointment when they tap him up for a drink/remind him of a debt/ask about his sister/start to talk about themselves excessively - (utilising Vnpcs) Or Hugz grabs you suddenly "Lets move, don't look over there, just follow me ~> Yeah, I saw my mother-in-law/some guy I owe money to/my illegitimate 18yr old son on a quest to find his father/a Judge.
One thing I've seen that I think is either automated or admin-led is random Siccers who are not players doing random or saying random things like you would see in a massive social network - people who aren't familiar, part of your daily, who you know face to face, can go react to in person, saying and living out their lives.
Another thing was when I first came to Sindome around 10 years ago - there were some really toxic players who just wanted to find a reason to kill or hurt everyone and hide behind the theme - but there was also a few players who lived in the CP slang, whose performance as Sindome citizens was authentic - they were ripping me off and helping me at the same time, or to be clearer - their roleplay was sleazy, greasy, untrustworthy, exploitive, irritable, as though I was dispensable (and ultimately I ended up being dispensable) but OOCLy they were creating rp openings, introductions, they were teaching me the game, they were gaining IC progress but it was all subtly woven into their roleplay.
I find the heavy attention on Immigrants a little bit jarring and unauthentic in comparison. They are literally 1 in 1000 that walked through the gate in the last 12 hours or less. They are human rubbish mixed with those who actually have something to them. I'd find it interesting if Greeters were able to be more impatient and irritable 'You're number 452 I dealt with today, I don't give a fuck what your name is, just sign here.. oh and check in at the factory/couriers if you want a bit of work after your papers are through.' -- Its a very very rough example but hopefully my point is clear on what I'm trying to say. There are ways to keep the theme, encourage players to stay, and enrich the atmosphere.
With the SIC - everyone knowing everybody and knowing everybody's business - they shouldn't. Leave something to mystery. Don't squat on the SIC like its your personal facebook feed, do create thematic things to put on the SIC - made up shit - "Damn my neighbour is such a fuckhole - turn your tv down guy!" Don't jump on and swamp everything thats said so that it becomes a reddit thread, let the atmosphere simmer. Treat Judges like the ultimate authority they are (unless you're a scumbag or an anarchy loving terrorist) instead of novelty celebrities you can poke fun at like your school english teacher till they turn and give you detention.
These are examples to show the difference and what helps to -build- immersion because maybe someone just needed that inspiration and to better understand why the wallet example is just one example of a wider problem.