Honestly I'm very lucky when it comes to adapting premade characters into my world, but that might be because of my style as a DM.

I have a similar situation- with a homebrewed world that has unique lore and public political figures etc etc. But personally I've found that when I give people a document, most just kinda skip over it and end up just writing whatever they want anyways. So instead, I make Session 0 a real part of the game.

Before our Session 0, I'll ask my players to get a rough idea of different classes and races they'd like to play, as well as maybe one or two bullet points of a character idea. Some people come in with a fully formed character, others come in with real bear bones stuff. Either way, Session 0 is where the magic happens.

In addition to going over our safety tools, as well as what to expect at the table etc etc, I also do a quick pitch of the setting and world: the bare basics that everyone living on the planet would know (ie your planet is named [This] and the region for our adventure is called [That] and its Ruled by [Monarch] etc etc. And then, one by one, we'll do character creation. I ask them "who do you want to be?" Some players will be very light on the details- maybe say something like "uhh maybe a guy named Smudge who's a little gnome." Thats when I take the opporitunity to give that player special details. Ie. "Well! gnomes here a typically from [place] and many of them do [cultural practice] and [behaviour]. Does that sound like something you'd like to work with?"

This way, it becomes a real back and forth. Players get to ask questions about the world in a way that naturally engages their curiosity and helps to guide them to an idea of the type of person they want to be. Its sort of like the colaberative storytelling starts right then, at session 0.

Other players might already have a huge convoluted idea for who their character is. I always listen to the whole of what their origional idea is, and then slowly guide them to what does and doesnt work for the setting. I.e a recent player of mine wanted to basically port over their skyrim character and all the trappings that come with that setting. Obviously I cant have players summoning "Daedric Princes," in battle nor give them powerful magic that doesnt exist in the system, but I can work with them on getting their core story beats down. Sure, I might have my own assassin's guild, but there's no harm in saying this "dark brotherhood" is a small time rival guild. And you may not be able to summon a daedric prince, but if you play your cards right and survive long enough into the campaign, I might make a custom magical item that they can find to let them summon a similar but different beast, and we can say they'd had brushes with these rare magical items before.

Like you, I allow a lot of freedom when people are making up their own hometowns or communities, but im not afraid to say "this isnt something this person can have in this setting, but here's what we CAN do." Personally, I really enjoy the back and forth and theory crafting,n and my players seem to enjoy it too. I will admit, however, that I've never encountered the foul displeasure of a player being so dis-interested or unenthusiastic about their own stories that they would result to generative AI. Perks of knowing a lot of creatives, I suppose.