I'm basically saying what if Gensokyo is actually just an ordinary, undeveloped area. Like an undiscovered island. Gods, magic and youkai wouldn't really exist but the inhabitants believe they do. I guess hermits might exist, but they wouldn't have all the crazy powers we're shown.
Well, if we keep the setting as it is minus all of the supernatural part, then the biggest change that we'll have is that there won't be any great border : if the residents (not "denizens" in this case) of Gensokyo do still know of the outside world like in canon, then they'll definitely be able to go there, and the opposite'll also works : people from the "outside", advanced world will also be able to freely enter Gensokyo. Of course this implies that Gensokyo'll be likely to undergo a lot of scientifical and technological change, which is both a logical conclusion but also a bit of a killer argument for the thread... at any rate, that is definitely the first and biggest change.
Also, there'll be inevitable changes in the setting :
Changes toward the cast :-The humans'll be... very human-like
-The animal youkai'll be random animals. A bit outstanding compared to the regular ones but still animals.
-The youkai'll be these scary things you hear in the stories told by your grandpa or these monsters that appears in most of the books. Also, whatever natural phenomon'll totally be blamed on them
-The gods'll meet the youkai's fate too, except they'll have chances to keep their names. They are sure to be worshipped
-The ghosts'll meet the youkai's fate too. Also, you won't be able to use them to cool down in summer
-The hermits won't have super powers. Their slightly longer lives may be attributed to some diet of some sort or something
-The magicians'll be a shady bunch of people
-Byakuren'll be a bunch of dried up bones, likewise for some other people
-Sumireko may or may not have her ESP powers
-Keine wouldn't build any shady history related secret society
-Merry and Renko are in for a rude awakening. Like, a really rude one
(Western related stuff'll be mentionned later)
Changes towards the infrastructures and location :-SDM couldn't have been reasonably built there, it'll likely be in some part of Europe
-People may believe in the netherworld, but they surely won't think up of anything like Hakugyokurou
-Eientei'll be in ruins, as it couldn't have been kept in good state eternally. Incidentaly, it may have never existed since it was never put inside history
-No ministry of what's-right-what's-wrong, but Higan and the Sanzu river are part of folklore
-The Palanquin'll be a bunch of dried up pilewood, likewise for a some other places
-Youkai hideouts (such as the kappa's hideout) would totally be some random places like a dangerous pond or places people can't arguably get into
-The locations that are unique to Touhou, such as Senkai, would not exist
-BUT the Dragon God statue may still be there, since belief in the Dragon God is unique to Gensokyo folks. Maybe the statue was build by their ancestors in commemoration of one hell of a rainy day if anything in this context (damn, that'd involve some serious craftmanship)
Changes in the lore :-No great Hakurei Border. Everything this implies has already been mentionned in the first paragraph
-No spellcards battles. Heck, maybe no incident at all, we'll just have people who practice the matching rituals and traditions related to anything that happens in their life
-Danmaku ? What's that ?
-Merry and Renko might be intersted in anthropology, archeology, history or something, as the thing they'll be searching for is a reality that might be interesting. Otherwise, I can see them spending their days playing some shmup game, this works too
-The textbook youkai'll stay alive inside the books and the heart and mind of the Gensokyo residents who firmly believe these exists : if they're gonna live while believing in them and shape their lives according to that belief, then the belief of the "youkai"'ll definitely have managed to affect their lives
-Gensokyo's society would get totally wrecked if people behaved the way they did as in HM
-Scientifically impossible stuff'll stay impossible. The end
-Youkai that are based of Western or foreign cultures wouldn't exist in this boring Gensokyo
Might've forgotten a few things, but I believe the biggest thing that'll happen is the disappearance of the great border, Gensokyo's resident believing in the youkai'll just affect the way they live, although that belief doesn't alter reality in another way.
But if we go to the origins of the humans in Gensokyo in Touhou canon, going by the state of canon around the time of EoSD (IIRC), various humans were first sent there to deal with the youkai from the haunted region called Gensokyo : if the youkai never existed, they would never have caused any mayhem to begin with, thus there won't be any need to send humans there in the first place, and there won't be any descendant of these people to reside in Gensokyo. It's something else if lots of people gather together to seclude themselves there, although this wouldn't sound legit :X
