the deep moans round with many voices

He does not deny that fictional events and people can move us; he just seems to think the emotions roused are sort of... pale shadows of the emotions roused by real life events. He would have a much better case if he talked about the difference between fictional events and real life events that happen to a person directly. I think he is missing the importance of the sense of connection you talk about -- the idea that we know the person affected by an event. There are many fictional people I know quite well; conversely, there are billions of real people I don't know from Adam. So while I can feel compassion for them in the abstract, as fellow members of the human race and so on, it's hard to care on a personal level.

I really am baffled at the idea that a story stops and its world disintegrates just because the movie ends or the book closes. The story isn't in the book, after all. The book is only the vehicle to transmit the story into readers' minds; after that, it lives in us. I think revivals of old stories (whether trying to breathe new life into movie franchises, or things like the new Doctor Who series) prove quite conclusively that people don't stop caring about stories just because they reach the words "The End" or some equivalent thereof.

to think about them would involve creating a novel fiction
...and what's wrong with that?

Nothing whatsoever. :-D