I remember reading somewhere a long time ago that a writer should not use bold or italic type, but instead use word choice to convey what is important in a sentence. Does this apply to fictional dialog?
It just doesn’t seem realistic to me to expect all my characters to choose their words carefully.
No, it isn't, though even dialog is generally not written exactly the way people talk with all the fillers, fragments, and mid-stream changes in sentence focus we are all "guilty" of in real-world speech. Ever watch closed captioning on TV, or even more excitingly, had to close caption a lecture or demo you recorded for a class (as I just did recently with our switch to online teaching)? It really demonstrates how even professors, diplomats, and journalists don't speak the way they write. I had no idea I started so many sentences with the word "so," for instance, or said "All right" so often, or sometimes trailed off without finishing a sentence, or changed what I was going to say mid sentence. Some of it is I'm not used to verbally describing a lab process while doing it and being recorded, but even polished, practiced people do these things more than characters generally do in dialog. Things look worse in writing than they sound in speech.
But this doesn't mean you shouldn't use vocabulary that makes sense for your characters, and for the narrative viewpoint, and for the narrative voice etc. You absolutely should. It also doesn't mean you aren't "allowed" to use italics for tonal emphasis.
"I didn't know he would want that one" has a very different feel than "I didn't know he would want
that one."
I suppose you could write, '"I didn't know he would want that one," Tom said, emphasizing the word "that."' Maybe some writers prefer to do it that way, but it isn't better to do it that way.
I wouldn't over use italics for emphasis, any more than I'd overuse adverbs, adjectives, fancy dialog tags etc., but there is going to be a certain subjectivity when it comes to assessing how much is "too much."' Some people hate using any of these things ever, and find ways to write just fine without them. A few of these people (some are successful writers) insist everyone should write the way they do, but the fact that plenty of other successful writers don't write the same way probably means this advice can be taken with a generous handful of salt.
Bold facing and capitalization seems to be much used less in trade-published fiction for emphasis than italics. I've seen capitalization used for when a character is shouting, generally in juvenile or YA fiction, though. Shouting isn't the same thing as emphasizing a word within a sentence.
Generally, when I've seen bold face used in fiction it's when the author is denoting what a character is reading on a sign or something, but I can't say it's very common, IME.