There could also be characters who are a bit skeptical. Dolores, with her ability to hear everything, might be able to tell if the fanfiction is based on real events or just pure imagination. If it's too far - fetched, she might be less impressed. However, overall, most characters would probably see it as a form of celebration of their story and be at least somewhat entertained by it.
The younger characters in Encanto like Antonio would be excited. He loves stories and new ideas, so Mirabel fanfiction would be like a new adventure for him. He might want to share it with his animal friends. And Dolores, with her ability to hear everything, might already know about the fanfiction. She could be either intrigued or a bit worried depending on how the fanfiction is being received by the rest of the village. If it's causing a stir, she might be concerned about the family's reputation, but if it's positive, she would likely be quietly supportive.
If the grandfather is very warm and accepting, Shikaneji would feel relieved and happy. They might open up more about their relationship and their dreams. Nejire could start chatting excitedly about their future together, and Shinsou would relax and join in the conversation more. However, if the grandfather is not so friendly, they would be disappointed and perhaps a bit defensive.
At first, Sans would probably be a bit shocked, but then he'd turn on his laid - back, sarcastic attitude. He might make jokes at Gaster's expense, which could either annoy Gaster or make him respect Sans more. If Gaster tries to harm him, Sans could use his shortcuts to dodge attacks and try to find a way to reverse the situation. He'd also likely be thinking about how this affects his friends in the Underground, especially Papyrus, and try to find a way back to them.
They might be really surprised. Some characters could be flattered by the positive portrayals in the fanfiction. For example, Mirabel might be happy to see different interpretations of her story and how she's seen as a hero in some fics.
Encanto is about a magical family living in a hidden place in Colombia. Each family member has a unique gift, but the main character, Mirabel, doesn't have one. The story follows her as she tries to save the magic of their home.
Encanto is an original story. Disney's team of writers and animators came up with the concept and brought it to life on the big screen. It's not a adaptation or retelling of another story.