Famous literary characters should be identified with particular individuals in the real world.
So at some point, some king or leader would have chosen a man to "be" Sherlock Holmes. He would have descendants, and they would be known as the descendants of Sherlock Holmes. Their scandals would be interpreted in light of what their ancestor was like. If Sherlock Holmes' son became a criminal, it'd be an ironic news story!
Frodo would be a little person.
So we would have real versions of Pip, Ahab, etc.
They may even have heritable titles.
Humans have a need to follow the gossip of someone interesting. It'd be better to be a random family than a politician.
People have a huge desire for crossovers - see the world of fanfiction, xmen, etc. If we make sure to choose someone similar in personality for the original embodiment of a character, there would be lots of successes as those traits were passed down. There would also be back-pressure as the myth and archetype of the original character played itself out in the person's life.