One of the greatest challenges of a LARP is reconciling the Out-of-Game realities that effect the IG experience. Every LARP, of course, has to deal with a standard set of these (many of which are inevitable parts of campsite structure): cars become carriages, camp cabins are villages, taverns, or ruins, and some features, such as electrical wire, are just ignored entirely. Generally, this requires players to accept the "willing suspension of disbelief." But what about other things, especially creatures, that are standard parts of daily life? I'll give you one example: horses.
As any fantasy lover or historian will know, horses are integral parts of classic fantasy repertoire and actual historical maneuvers. Cavalry were essential to military development, and horse husbandry facilitated human complexity. Clearly, though, horses are not feasible for a LARP. While we may be able to forgive giants, dragons, and unicorns (all of which I've seen at a LARP), the absence of horses is a bit jarring. Horses are part of idiomatic parlance ("I could eat a horse/beat a dead horse/horsing around"), and, for many people, a day to day reality that is hard to ignore. So, in a LARP, it's reasonable to a) phys-rep some horses (difficult) or b) make an IG excuse for the dearth of equines. I know Madrigal has some excuse-- they were lost in a series of wars, or something similar, and I'm sure other games have encountered this. Mirror, Mirror has the very nifty and tidy "refraction" mechanic: things don't appear in the gameworld as they would elsewhere-- this is due to mirrorways and "refraction" through these mirrorways. (There is, in fact, a horse IG-- he has been refracted as a small mouse.)
What OoG/IG problems have you run into-- either as a PC, NPC, or plot staff? How have you dealt with these OoG realities that effect IG play?