In the moment narration

Another way to keep the narration vivid and concrete is to have as much as possible happen in the moment. Read through your scenes looking for anything that's even slightly retrospective and see if you can rewrite that to happen immediately, and that any reaction (and there should probably be a reaction to anything that happens) comes right then, not a few paragraphs later.

I think the retrospective happens when we need to show more or less simultaneous events but are hampered by the linear nature of prose. In film, we could have the video showing one thing (the child playing in the sandpile) while the audio shows something else (the explosion happening a few blocks away), but in language, we usually can't juxtapose or layer or intersperse so easily. So sometimes we have an event in one paragraph, then some simultaneous stuff in the next paragraph, and the reaction to the event in a third paragraph-- maybe a page later! And since it's a page later, we might have some backwards reference:
Paragraph 1 (they're talking, and he says something about missing her at the party)

Paragraph 2 -- Mary negotiated a tight turn and headed south on Rogers Avenue. The commuters were just starting out, and the sun was rising over the lake. The glare momentarily blinded her, and she just missed rear-ending a hummer at the traffic light. Her heart thumped in that panicky way that came when she barely, once again, cheated death or at least the auto-body repair shops.

She glanced at him to see if he'd noticed the near-crash. But he was looking sad, not scared. Now she remembered what he had said just a few minutes before. She had hurt him with her careless actions. "I'm sorry. I should have called to let you know that I wasn't going to make it to your party."

Notice the "had"? That use of past-perfect tense is usually a sign that you've gone into retrospective, casting events into the past of the book. There are several problems with this:

1) One is that using the past-perfect (had) tense throws the reader out of the narrative continuum, the sense that this is all happening right now, in this order. You never want the readers getting thrown out of the story journey, even for a second-- you don't know if you can get them back. Now this might be worth it if your purpose (as in an experimental narrative or avant-garde story) is to keep the reader off-balance, or to make the reader question the "reality" of the story, or to demonstrate in a post-modern way the "nuts and bolts" that go into building a story. But most stories aren't experimental and post-modern, so probably you don't want that effect in a more conventional narrative.

2) Having a seeming lapse of time (it might be only a moment, but it's half a page on the page) between what he says and her reaction might indicate that what he said wasn't important. (Now do consider that if you want to slip in a clue in a mystery, this might be a good "distraction" technique.) If it's supposed to be important, a more immediate reaction might show that. The respondent doesn't have to verbally respond right away, but if she reacts in some way immediately, it will highlight the importance of the what he said (or whatever the stimulus is).

3) Interlocking dialogue, where what he says leads right to what she said, is a sign of the author's control and focus. Of course you can't always have that kind of dialogue, and you might not even want it (I mentioned up-blog a Muriel Sparks story where the disconnected dialogue was a reflection of the character's alienation). But absent another purpose, we might work on how dialogue can interlock, stimulus-response, cause-effect. That makes it "conversation" and not just "two monologues going on at about the same time."

So how do you do this when you want intervening action? When they're not just talking, they're doing? A couple thoughts, by no means exhaustive--

--Think about putting the dialogue that should interlock together, and the action before or after it. You're in control here! She can be doing the driving thing, and just be coming out of a turn when he mentions the party, and she can respond to that right away, having already made the driving action.

-- You can intersperse smaller bits of action, not a whole paragraph, with the speech. You might actually stretch out the speech, do some "what did you say" to make room for more speech time:
Mary negotiated the tight right-turn and headed south on Rogers Avenue. "What was that you said?" The commuters were just starting out, and the sun was rising over the lake.

"I was just wondering if you forgot about my birthday party, that's all."

"No, no," she said, distracted. "I didn't forget--" The glare momentarily blinded her, and she just missed rear-ending a hummer at the traffic light. Her heart thumped in that panicky way that came when she barely, once again, cheated death or at least the auto-body repair shops.

She glanced at him to see if he'd noticed the near-crash. But he was looking sad, not scared. "What?"

"Nothing."

She had hurt him with her thoughtlessness. "It's not nothing. I'm sorry. I should have called to let you know that I wasn't going to make it to your party."

-- Keep in mind these people and who they are and how they would feel. Would Tony keep bugging her about this, or shut up after mentioning it once? Would Sarah be hypersensitive to his mood, or blind to it? Who are they? How do they interact, with the world and with each other? Don't lose who they are and how they are when you're writing the scene, just to get in some action.

-- Using repetition of keywords can make more coherence even in a somewhat distracted narrative. Notice how she re-uses "nothing" and "party" and "forget" from his lines. That helps the "interlock".

--Design sentences and paragraphs in ways that help the interlock. Look especially at the start and end. If she's going to "echo" something he said, even a word, try getting that to be one of the last things in his paragraph.
Also, transitions at the start of paragraphs (Theresa was mentioning this) can make for greater coherence. It might just be a word, but I really like occasionally (with me, it's frequently, but it's good at least occasionally) starting a speech paragraph with a sentence of either action or thought, but something that might relate to the conversation. Think "time and place," but also emotion, like:
Now she turned to look at him.
or
Sounded like he was accusing her. "What do you mean?"
or
When they got home, she pointed to the overflowing mailbox.
or
She thought about their future and slowly counted to ten. When she could speak calmly, she said,

These paragraph design techniques can really improve the flow of your prose, btw. Too many paragraphs that start with a line of dialogue might cause jaggedness. Experiment!

-- Quote tags can go almost anywhere in the speech paragraph-- before, during, or after the thing said. (Some paragraphs you might do without them altogether-- but probably not all.) Tags are not just a means of identifying who said what. They are also a way to create rhythm by adding a pause, something that can just be absorbed and accepted.

-- LISTEN to your dialogue paragraphs and passages-- not just the individual quotes and lines. Listen to the whole passage-- the rhythm, the interlock, the tone, the pace. You can vary each of those depending on the meaning of the passage, but you have to "hear" them to know when and how to vary.

-- Most important, know your characters and the way they think and interact. If you don't want her to come off like an insensitive blunderbuss, you don't want her to ignore for two paragraphs his sadness. If they're angry at each other, they'll be looking for things to get offended at, and reacting defensively to what they see as accusations. Show that in how quickly they respond. (After all, when you feel defensive, you respond right away-- if you take time to think, you might realize that his mentioning that his second-graders are moving from pencils to pens isn't really a slam on your inability to complete your master's thesis.)

Other ideas? I find in editing I'm often suggesting a short line (even just a single word) at the start of the dialogue paragraph (that is, before the first line of speech in the paragraph), but that makes it all the more important probably that the speech interlock around it.
Alicia