Interesting article. I like the term 'psychic distance' as they call it. It is something to consider when trying to achieve a certain reaction in the reader. I agree that it can be good to create more or less distance to achieve different effects, and a gradual shift can drawn a reader in nicely.
They used a character to do this, but I think you can use setting as a character to bring the reader closer to the story as well. I suppose there's many different ways to do this, even a writer's voice can do this, I think.
I do wonder about the examples given. The jump between level 2 and 3 seemed incomparable unless they were combined. And the level 4 example I thought was not as effective as level 3, just wordier, and even level 5 was a bit wordy. I don't think just adding descriptions necessarily make things 'closer.' Or maybe they do, but if it doesn't read well, then it will have the opposite effect.
If what they're ultimately looking to do from 'psychic distance' is draw the reader in and get an investment in the story, cookies (to use Agent Pete's term) do that best, I think. And I didn't see any cookies in any of the examples.
It also helps to consider 'camera' distance, and looking at why a camera 'rolls' from one distance to another. A full shot can lead/pull into a mid shot and then into a close up without causing a 'snap' in the reader, and a panoramic shot needs to 'roll' from the great distance through the long, full, mid, before the close.
Example: mountains, eagle as speck in sky, rolling down over the forests toward the town, the gates, the guards, and then the man on a horse, followed by his face.
This is just physical distance, but it applies in the same way as psychic distance and needs to 'flow' from one perspective to another. It's not about cookies, only keeping the reader on the line rather than unhinged by sudden changes of [physical, emotional, spiritual] distance.