IIRC their real life solution was to leave gaps between elements (eg index 0, 100, 200… instead of 0, 1, 2) and re index when needed. Probably works well enough, what I came up with is (as you say) the idea of fractional indexing, but dealing with decimals is a pain so you can instead represent them as vectors, which you can just represent as a string of numbers that you sort lexicographically.
So an element inserted between elements 1 and 2 gets an index 11 (anything between 11-19 is fine). Between 1 and 11 is 101. Between 11 and 2 is 12 (or anything between 12-19). Note that these indexes are not numbers, they’re string that are compared lexicographically.
I’m sure there’s downsides, eg it takes a lot more memory to sort these indexes (strings are much larger than numbers). It feels a bit too smart to not have unexpected downsides.