Actually, this isn't a new problem. Movies are a realistic medium, and so movie musicals only really work when they create a completely new stylized world in which singing and dancing make sense. The "classic" movie musicals of the 1940s and 1950s and their modern counterparts were mostly performance or backstage musicals--they were ABOUT singers and dancers (SINGIN' IN THE RAIN, CABARET, THE BAND WAGON, WHITE CHRISTMAS, KISS ME, KATE, FAME, etc.) Apart from THE SOUND OF MUSIC and MEET ME IN ST. LOUIS, which made a kind of style out of home theatricals, the Rodgers and Hammerstein "naturalistic" approach has never really worked on film. (Try to watch the dreadful movie of CAROUSEL--yeah, yeah, I'm sure someone on this board just loves it). DREAMGIRLS did best with the "performance" scenes and fantasies and faltered slightly when it went "realistic" ("We are a Family"). The most charming parts of ACROSS THE UNIVERSE were songs as interior monologues--the longing lesbian cheerleader version of "I Wanna Hold Your Hand", for example. (At moments like those, the movie seemed to be about the way pop music unites our experience--how we apply the latest Top Forty hit to whatever's happening in our own lives.) CHICAGO and PENNIES FROM HEAVEN did the fantasy-world thing best, while SWEENEY is an example of the totally-stylized world concept. I think this is probably how it's going to stay, and I don't know that that's a bad thing.
I ask in all honesty/What would life be?/Without a song and a dance, what are we?/So I say "Thank you for the music/For giving it to me."