If the Three Hearts... Ariel were real, then he would exist in the Carolingian universe while meanwhile I would exist - and would attend the duo performance - in our universe. Indeed, if the Poul Anderson of our universe were properly attuned to the Carolingian universe, then I would read about the Ariel of that universe while thinking that he was fiction. However, if the duo Ariel were real, then s/he would exist in a Shakespearean universe, or maybe just in a Tempest universe, that would not necessarily coexist with any other universe. The mind boggles.
The next threat after the werewolf is a nixie who pulls Holger to the bottom of a lake. He theorizes that the nixie's spell extracts oxygen from the water for him and that a monomolecular film of oxygen covers his face. But this is just speculation. The novel does not comprehensively rationalize magic. In this case, the nixie acknowledges that she is acting for Morgan le Fay. Holger escapes by igniting the magnesium dagger.