While that does make sense for dialogue, I am still unsure why Novik chooses to apply it to the narrative/stream of conscious. I know you've explained as best you can and I'm not asking you to delve further, I'm just saying that the approach seems needlessly tedious. I don't think people actually think of each other with different addresses based on the atmosphere, although they might address people different by habit. I think she's reaching here, and it gets confusing.