Fantasy or Reality?

Escaping into fantasies are a quick, easy, (and cheap) way to kill time.
Or procrastinate.

Lately I've been back at my novel project (or a 10-page throw-up of words (double spaced) that resemble something like one) from school. Yeah, we all had to write a fraction of a novel that had to be all outlined and scaffolded in a short period of time. Fun times.
Anyway, I can't stop thinking about it.
But I feel like I'm stuck in that never-ending cycle of thinking and planning. And fact-checking. So I'm actually not getting any real writing done.
The problem is that I want to set it in a particular historical point in time. In my over-nitpickiness I keep on researching, and fall into a pit of self-doubt. But there's nothing stopping me from making something more fantasy-esque - this is a work of fiction, after all.

The problem, I guess, is that it's really hard for me to make compromises between fantasy and reality in story-writing, such as "come up with a fake suburban town in Alberta to set my story". I start thinking where it is, at what point does it come into contact with real areas and real people, how much of the real world impacts it, what do the neighbors think of the area, what is its history... If I think of something, I have to think it through as in all the way through like the hole in a doughnut. There's no point in a doughnut if it has no hole to make it a ring (I have a honey cruller in the fridge, btw, saving it for tomorrow).
And as much as it's fun to world-build, it bothers me a lot to forge something like a 'fake' town into 'reality' - like jamming an extra piece of a puzzle when it's already completed. It's that kind of uneasiness I feel, like I'm intruding or being awfully impolite. Even though it's a completely fictional piece of writing, I still feel very guilty.

I know I know, no one bloody cares about stupid writing problems on my sloppy excuse for a novel that's never seeing the light of day, but I have nothing else to say today.
Really. I don't.
Except for stupid medical problems and how pumpkin spice muffins at Timmy's are awesomesauce and a vague love-hate relationship with receipts.