A theater audience accepts a new, tenuous reality as soon as it becomes involved with the play. The better the performance, the writing, and set design, the deeper is the acceptance.
I believe the "deals" Mr. Nichols is talking about have more to do with the limitations of the theater genre itself. Whereas a stage play often may refer to big events that occur off stage, a film must show them. Whereas a stage actor is allowed a poetic voice whose words paint the picture, a film actor is actually in the picture, and telling is superfluous. The stage setting may consist of fragments and symbols. It is the rare film that does not emulate reality.