So what is the potential of a world literally made up of still-living gods?

Yeah. Probably works better for the basis of a novel. It's also not without precedent; China Mieville's New Crobuzon is built among the bones of a huge dead something, for example.

So kinda like Xenoblade Chronicles?
That was actually a pretty amazing setting.
The people were like single celled organisms
compared to their dead gods.

Depends on what the gods are like.

I like FF12 and 13's approach to the question, though:

NOTHING GOOD, IF YOU VALUE YOUR ILLUSIONS OF FREEDOM

While most of them are dead by the time the games start the Souls Series of vidjagames could be a great inspiration.
Priscilla could easily be seen as a god and Gwyndolin (in my opinion) qualifies as she was able to produce a giant ass illusion over all of Anor Londo.

I would happily serve as one of Gwyndolin's knights...

Norse mythology with extra focus on beasts
Hindu gods just potray themselves as animal-like

Fenrir is a fucking wolves.
Dunno if you can call the crows and animals of the gods, as gods too.
They're at least "gody".

If the earth itself is the body of a still-living god(dess), I guarantee at least one of my characters would try to have sex with it.

I don't know what you're talking about but in Hindu mythology, there are millions of gods that throughout eras incarnate into millions of other gods, and these gods together with the entire universe and all living mortal things are just a figment of the imagination of the Godhead conversing with itself.

Gods stacked onto gods onto gods onto gods. Like a god pyramid.

I'm personally a fan of different tiers of gods, varying from walking the earth and being assholes to being abstract incomprehensible entities.

I like to make petty earth-tier gods act more like corrupt politicians.

Kamichu? Gods and spirits exist in modern daily life but for the most part nobody cares.

Sort of a low tech Shadowrun with it's spirits re-labled as "gods" and the average person will never interact with them because most people lack spiritual awareness necessary to see them.

I had a game designed around this once. The idea was that the world was the classic disk held up by elephants on turtle's back; but the disk was actually the giant corpse of a god. There were other gods running around, and much of the world's nature was made up of their current predicaments. For instance, all the oceans were the blood of a particular god that had gotten into conflict with the god of the sky and had been pinned to the earth by a lance, bleeding eternally but not dead. There's a shrine built up on her chest, which is peaking out of the ocean. The elephants and the shell of the turtle make up the underworld, where the souls of people who have died go and are judged. Depending on their nature they are flung out somewhere on the turtle's shell, with the most worthy flung far onto the edges and the worst kept near the middle. All manner of horrible beasts roam the place, with it becoming worse deeper in. Living people have colonized the elephants and built vertical cities and structures down to the shell. A big draw for them are religious pilgrims who pass through on the way to visit people in the after life and ask about things. The actual players themselves were gonna be hunters killing the giant demons that live on the shell, in order to sell their rare parts and materials up on the "surface".

see: The Elder Scrolls

I've been playing with a Fantasy Opera (space opera in fantasy) setting where all continents are just massive comatose nature spirits. Getting them to wake up momentarily is the basis for druidic magic. Getting them to wake up completely is super-bad for the inhabitants, and generally only occurs from such things as extremely destructive strip-mining or cataclysmic events.

The setting only has two traditional gods. They aren't worshipped, they just exist.

>world literally made up of still-living gods?
Am I the only one here who pays attention to the "LITERARY". That to me suggests that the physical matter of the world: the landmasses and shit, are actually literal physical bodies of still-living gods.
Or am I getting that wrong? Otherwise, the proposition isn't exactly novel: most fantasy worlds and most actual existing or past mythologies assume that world is full of still-living gods.

Not many suggest that the entirety of the world is physically the bodies of Gods.
It does remind me of the mythology of Boddo in Pathologic though. Or those flying fortresses made out of God Carcasses in Planescape.
Or my own home-made settings, specifically one particular religion (admitedly inspired by Pathologic), in which some cultures believe that the (solid) ground is actually a giant body of a divine Bull floating on the surface of an endless ocean. Most of them believe the Bull is dead though, sacrificed in order to create all other life.