The Little Shaman is a spiritual coach & specialist in cluster B personality disorders, with a popular YouTube show and clients worldwide.
Narcissism is a spectrum, and there is a large grey area regarding how someone is affected by it and how they will behave. The people we usually refer to as narcissists are suffering from pathological narcissism. This means that their narcissism is pathological; it's so deep seated and inflexible that it negatively affects almost everything about their lives. They can't see past it and they cannot adapt their perception or affect to reality, even when presented with tangible proof that they are wrong or mistaken.
There are many other levels of narcissism, though. There are people who have narcissistic traits, but their narcissism is not pathological. This means that it does not affect their perception to the point that they cannot see past it. They can usually change things and adapt. It may be difficult, but it's generally possible. Their degree of narcissism is flexible. We can see this in people who may present as narcissistic in some ways, but they don't seem delusional and unable to adapt to situations. For example, your mother in law may seem narcissistic. She may come across as arrogant and controlling, she may argue that she's right to the point of ridiculousness. However, if you present her with facts, she is able to admit he's wrong. It may be grudgingly, but she is able to adapt her stance to fit reality. This would be an example of someone who could be narcissistic but is not pathologically narcissistic.
People who are pathologically narcissistic suffer from more than just selfishness or a different perception. They are unable to change their beliefs, even when clearly proven wrong. Reality that contradicts how they feel is ignored, denied or altered to fit. This level of narcissism is considered inflexible. People who simply posses narcissistic traits will not do that. They can understand, accept and adapt their perception to reality. People often ask if codependency is narcissism. Codependency is a generally narcissistic thing, but we probably would not call simply codependent people narcissists.
Codependent people are attempting to get their needs met and validate themselves through other people but their level of narcissism is not pathological. They can see there is a problem if shown and they can generally adapt their perceptions and beliefs to reality. It may be difficult for them to do initially, as there is usually a lot of emotional work to do in order for them to see the problem, but it is by no means impossible for them. Narcissists can be codependent after a fashion; for example, covert narcissists may be codependent, and they generally foster enmeshed relationships with people as they don't respect boundaries between people and cannot separate themselves from the external world, but generally speaking, we would not say codependent people are pathologically narcissistic. And narcissists are of course, as generally unwilling and unable to heal their codependency as they are anything else.
Identifying narcissistic traits in the self requires a level of self-awareness and self-assessment that is beyond what is generally displayed by pathologically narcissistic people. In other words, they can't see it and because they can't see it, they are unable to change it. Another difference would be that, though people with narcissistic tendencies or traits may be overly-influenced by their feelings, they can still separate feelings from facts, and from the feelings of other people. Pathologically narcissistic people are unable to do this. They believe their feelings are facts, and that others share these feelings and experiences. They essentially live in a world where everything they experience is created by - and dependent on - their internal feelings. People often seem to believe narcissists don't have feelings. This is not the case. Not having empathy doesn't mean they have no feelings at all. They certainly do, and these feelings play a huge role in their perception and behavior - especially subconsciously.
Codependent people, by contrast, may attach exaggerated importance to the feelings and opinions of others, but they understand that these things are separate from their own. They may have trouble with boundaries, but they understand that others are individual people. People who are pathologically narcissistic do not understand this. They believe their feelings are everyone's feelings. This is where their so-called delusional behavior comes from. If they believe they are worthless, they insist that everyone else feels that way, too. If they believe they are the greatest thing that ever lived, they insist that everyone else feels that way, as well. There is no understanding here that other people are separate and have their own feelings, thoughts and opinions. Everything is perceived as flowing to - and from - themselves. Narcissism is defined as a failure to distinguish the self from the external world. There is no understanding that they are separate entities from the world. To the narcissist, the world is perceived as literally revolving around them, as existing because they exist. This is something we only otherwise see in very young children and babies.
The reason for the discrepancy between those with narcissistic traits and those who are pathologically narcissistic likely has to do with when the narcissistic wound occured, and the severity of it. The narcissistic wound is the trauma or series of traumas that caused the narcissism in the first place. People who are pathologically narcissistic may have experienced an earlier and more severe narcissistic wound than those who simply have narcissistic traits. For example, a person who was abused or neglected as an infant is likely to be more narcissistic than someone who was not. It could also have to do with the individual's personality, their biology and many other things. Narcissistic people are still people, and we are all different, with our own ways of dealing with things, coping mechanisms, sensitivities and personalities. The mind is a remarkable thing and the lengths it will go to protect itself are truly amazing.
So to recap, the most noticeable difference for you to be able to tell whether you are dealing with a person who is pathologically narcissistic or who has narcissistic traits would be their level of flexibility. Can this person admit they are wrong? Can they adapt to reality? Do they insist their feelings are facts? Do they insist their feelings are your feelings? Do they try to alter reality to fit their interpretation of things? Do they seem unable to understand that you are a separate person from them? All of these things can help you decide what you are dealing with. In the end, if a person is abusive, if they are uncaring, if they are disrespectful, if they are selfish... it doesn't really matter where on the spectrum they fall. You never have to put up with behavior that you find hurtful.