that there are people whose imaginations are very vivid. Perhaps the author herself had such stories in her head which she then put on paper. Emma hasn't taken up such an outlet, and instead of putting them on paper is acting it out.

The book is full of the word 'fancy' and 'imagination' where Emma is concerned.

Emma is like Catherine Morland. In both cases the two imagined their fancies to be facts.
Lets see what happens in Emma's case.

That's my interpretation.

What do you think this sentence means if you don't think that the author finds it rather appealing that Emma has such fancies?