Henry Tilney would be able to help us, as he did with Gothic novels and human nature in English counties to Catherine. Really Northanger Abbey explains much to any Janeite about the Vicar of Wakefield. Like JA, Goldsmith studies two independent entities: life and literature.
Not all of literature, only the sentimental novel, which was alive and green during his time, not at the end of its possibilities yet. (Well, he touches tangentially upon theatre - I suppose, the budding playwright wakes up.) His sentimental novel shold fulfil readers' expectations to the full. A parody? Perhaps. At least a magnifying glass. If calamities, then all of them: loss of fortune, abduction, prison, fire, the cattle rustled - you name it, we have it in stock. If a villain, then industrious indeed, with a dozen virtuous girls seduced to his credit - mass production, in fact. If the happy end, then an avalanche; it only lacks striking oil and discovering gold in the kitchen garden plot. Can the book be enjoyed at this level? Oh yes! When I was a schoolgirl reading VoW for the first time (in translation), I delighted in the largesse pouring on the Primrose family and read this happiest of endings several times running. If I were fond of a good cry (as the readers of s. novels are described to be, and the watchers of soap operas probably are), then I would be re-reading appropriate pages, too. The understanding at another level came later, when I was better acquainted with the 18th century literature.
Not all of life, either. A piece here, a vignette there. Just anything that came within Coldsmith's observation - ah, he had a sharp eye and a keen sense of humour. I, for one, believe that those glimpses are true to life. A butler-politician, rogues at a country fair, a philosophical discourse, and allegorical family picture... Not least the characters themselves. A henpecked (let's call a spade a spade) husband, full of dignity at the same time. A mother trying to entice a suitor for her daughter, in minute details, up to the perfectly recognizable (in modern times, too!): if the pastry is crisp and soft, it is of Olivia's making. But then - serious thoughts of the law, crime and punishment, a sincere sermon. If they are pronounced by the same man that has a monogamy-bee in his bonnet, it only makes everything more life-like. Does it make the novel realistic? It does not.
Life and literature are rather mixed than blended. On every page the author plays a game with the reader: what is this, yes, this very paragraph under your eyes? Is it Life? Is it Literature? Your move, Gentle Reader!