Some characters could be confused. If the fanfiction takes a really wild turn and goes against the original lore, they might not understand what's going on. Take Jack Frost from ROTG. If a fanfiction makes him do something completely out of character, like being afraid of snow, he would be bewildered.
Well, some characters might be amused. They could find the creative interpretations in the fanfiction quite interesting and might even laugh at the funny or unexpected scenarios. For example, Toothless from HTTYD might be curious about how he is portrayed in the fanfictions.
There could also be characters who are flattered. If the fanfiction portrays them in a heroic or positive light, they would feel good about it. Hiccup from HTTYD, for instance, might be happy to see himself as an even greater hero in the fan - made stories.
They could also be confused. If the fanfiction takes a really wild turn from the original story, characters might not understand the new concepts or relationships presented. For example, if a fanfiction pairs two characters who have no interaction in the original in a romantic way, it could be bewildering for them.
Fishlegs would likely have a very animated reaction. If he comes across some fanfiction that has really strange dragon facts, he'd be so shocked. He might start rambling on about how wrong it is according to his extensive dragon knowledge. His eyes would be wide and he'd be waving his hands around.
In a really out - there view, if we consider the idea of the characters 'watching' as a metaphor for how the original creators might think the characters would react, then perhaps the creators could be influenced by that thought. But again, this is a very different way of looking at it and not really the characters themselves influencing the fanfiction.
The characters can interact in many ways. For example, Jack Frost can use his powers to play with the httyd dragons. He could create ice sculptures for them to play with or use his ice slides to race the dragons in the sky. Hiccup could show Jack Frost how to ride a dragon, and in return, Jack could teach Hiccup some of his tricks for moving around quickly and quietly.
In the fanfiction, different 'httyd' characters will have different reactions to future events. Hiccup, as a leader, will be vigilant. He'll try to anticipate any problems that might come with the future changes. Astrid will be his support, but also offer her own insights. She may be more focused on the practical aspects like food supplies and shelter in a changing future. The dragons, like Hookfang, may react based on their immediate senses. If they sense danger, they'll be defensive, but if it seems like an opportunity for a good hunt or exploration, they'll be more open.
In a rotg and httyd crossover fanfiction, perhaps the Guardians could come to Berk to protect it from a new threat. Pitch Black might team up with some dragon hunters, and the httyd characters along with the Guardians would have to work together. Hiccup could learn some new skills from the Guardians, like how to be more stealthy from Jack Frost, and the Guardians could be in awe of the dragons' intelligence and strength.
Some characters might be amused. They could find the creative interpretations in the fanfiction interesting, especially if it gives a new spin on their relationships or adventures in the Batman universe.
Some might be amused. For example, characters like Nagito Komaeda could find the different interpretations of himself in fanfiction either interesting or in line with his self - deprecating view. He might chuckle at how fans perceive his luck cycle in strange new ways.
The other characters like Fishlegs would probably be really into it. He loves stories and knowledge, so seeing different takes on the HTTYD 2 story in fanfiction would be like a goldmine for him. He might start analyzing the details and comparing them to what he knows from the real events.
With Jack Frost, his character can be developed by showing his reaction to the dragons. He might be fascinated by them at first but also a bit scared. His relationship with Toothless could be a key part. Maybe Toothless doesn't trust him immediately, and Jack has to earn that trust. This would show his determination and his ability to connect with different beings.