Not all fantasy is milieu-driven. The reductio ad absurdum of character-driven fantasy must be The Chronicles of Thomas Covenant, the Unbeliever (there are both a trilogy called The Second Chronicles of Thomas Covenant and an in-progress tetralogy called The Last Chronicles of Thomas Covenant; I read the Second Chronicles back when they were published and have not yet read the Last Chronicles, so these comments may or may not apply with the same force to the later books).
Thomas Covenant, an American novelist, finds himself in a fantasy world. The Chronicles were written in the 1970s, so they are predictably Tolkienish, though Donaldson fights clear of Tolkien’s tractor beam better than, say, Terry Brooks did in his first outing. But Covenant’s fantasy world (the “Land” whose very generic name should warn us not to focus on it too much) is not the center of the story. Instead, Covenant himself is. Thomas Covenant is a leper. His disease has made him bitter and cynical and, above all, an unbeliever. Each book of the Chronicles starts with him being knocked unconscious on Earth and awakening in the Land, the people of which have summoned him to be their prophesied savior in the struggle against Lord Foul the Despiser. Covenant does not believe that the Land exists (he thinks he’s dreaming and that the Land is a manifestation of his illness; especially in the first book of the Chronicles, the existence of the Land is kept in doubt for the reader by sticking very close to Covenant’s point of view–in later books, when the story starts following the POV of denizens of the Land, it gets harder to take seriously Covenant’s unbelief) and is filled with feelings of impotence and self-loathing. Covenant’s self-hatred and unbelief make him a very reluctant messiah and lead him to commit terrible crimes against people who believe in him. Most of the books are very deep inside Covenant’s head, and if you read them to the finish, you do so because you find the character compelling, interesting and maybe even sympathetic (not nice, though–Thomas Covenant is not a nice man).
By way of contrast, the reductio ad absurdum of milieu-driven fantasy stories must be Perdido Street Station. A city comes under attack by dream-consuming, transdimensional killer moths (yes). The city responds through various characters, including its elected officials, criminal overlords, rebel leaders, magical parasites, artificially intelligent junkyard constructs, gigantic insane demon-spiders and a band of misfit ne’er-do-wells, all of whom function like antibodies fighting a foreign infection. If you read Perdido Street Station thinking that the humans (and sentient bugs and frogs and birds) are its main characters, you may be frustrated with the plot, which will seem to have pointless excursions (I remember four pages narrating how a very minor sapient frog character swims through the river to leave the city and the story), dead ends (a race of hand-shaped parasites and their hosts, to whom only minor allusion has been made, makes a stand against the moths, and they all die) and dei ex machina (construct intelligence to the rescue, yay!). The city is the character; the setting is the point. If you enjoy the milieu, you keep reading.
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