Magic realism settings

[Superfluous Crow]

I wondered whether any of you had toyed with a magic realism setting? For those of you who aren't in the know, magic realism is a completely ordinary real-world setting where strange stuff happens from time to time. TVtropes might do the explaining somewhat better: http://tvtropes.org/pmwiki/pmwiki.php/Main/MagicRealism?from=Main.MagicalRealism
Anyway, it's a style that is common in South american fiction (Gabriel Garcia Marquez being one of the most famous authors who use it), and i think having a game setting involving it in some way could be sorta cool. One of the few problems is that it's hard to write up actual material when everything magical is supposed to be rather rare and unique. This means you could almost just start playing in a real world setting and just change the style and add some occasional oddities.  
Now, i just wanted to hear whether any of you had considered this; i don't reckon it's a project i'm going to start myself as i have plenty to do already :)

[SA]

I've done magical realism a number of times.  I like the whole magic as plot element and solely as plot element idea, and magic realism works great for that.

As a matter of fact, I've started writing a compendium of quirky and wonderful things to introduce to my side-setting.  They are usually in dreams (conversations with the dead, vague foretellings and the like) but occasionally something weirder pops up.  For instance, one NPC has the head of a goat; he's just a regular outcast otherwise, but he happens to have the head of a goat.  He couldn't for the life of him tell you why.  This particular example stretches the genre, but I think it fits within the tone.

[Superfluous Crow]

Reminds of the log lady from Twin Peaks :D

EDIT: Or did i misunderstand? Does he carry a goat head around or does he have a goat head where his human head should be?

[Steerpike]

Reminds me of Bottom from Midsummer.  Hmm I've been referencing Billy Shakes a lot...