Jouhei here, first and foremost: HOLY SHIT SPAZTIQUE!
OK, fanboy aside, I have to thank you, DiTR was my introduction to the world of Touhou fanfics(and was my drive to write Touhou fics), I was(and mostly still am) a mostly games fan, read the art books and used the wiki for manga details(though I sometimes just ignore the manga) if the fic involves events from the manga. I decided to write a dark fic, it came out so wrong I just dropped it, I was so angry at myself that I became too shy to post my own fics. Until I read A Fool's Reality, that fic changed how I would write forever, it wasn't a deconstruction of the self-insert Isekai genre, it was a straight deconstruction of Touhou as a whole and I loved it(it was my inspiration for the idea of a Hakurei Maiden gone wrong, not evil just not what Gensokyo needs) I was heartbroken at what happened to one of the characters and I almost cried, shit goes so FUBAR that all the cast(up until 9 anyway since 10 never got to happen) becomes traumatized.
But enough of my fanboying over great things, I've recently decided to post a Crossover fic on ff.net, it crosses Touhou with Persona and the way you wrote that you wanted to show Gensokyo at it's best made me want to give the girls a happier ending while keeping the Protagonist(named Shuujinkou, I know creative) also geting one(since her interests oppose those of Gensokyo). I became interested with the concepts of "Youkai Death", " Artificial Youkai" and "Youkai becoming Human", so what better series to cross over with than the series that has an unobtanium for supernatural creatures(Biomagnetite)?
It gives a Metaphysical explanation for how are Youkai born and has the Collective Unconscious as the place they go after death(unless struck down by another human directly), for the third concept though, it became my idea for a certain OC. The basic idea is that without a Hakurei Maiden(Reimu went rouge after getting her soul swapped with a demon and is out of reach thus her body is killed before she destroys Gensokyo and her soul is in the demon's body and enjoys life in the outside thus Gensokyo needs a new Maiden) Gensokyo will last only a few days, lucky for the Youkai, Reimu has a niece(not daughter, this happens after LoLK and AoCF couldn't happen) who is in her Teenage years(this feels like a self insert but bear with me here), unluckily said niece is an atheist who refuses to become a Designated Heroine and while Yukari insisted on not using force(she's smart and knows that in the outside world they're less than able to beat a Hakurei without risking killing her, also she's trying to be nice for once), some Youkai still tried to force her to come and she awakens to her power as a Persona User, the plot has mostly interactions between the protagonist and her friends and Youkai attacking her are not too prominent so most of the action comes in the form of fighting Artificial Youkai made to destroy Gensokyo and to not mess with the likes of the Touhou cast they hunt down the protagonist and try to kill the Youkai in a war of attrition.
The main characters will develop in one way or another(since one of them is the hero from Persona 5 who just wants to survive being in a delinquent school after his life got ruined at the end of his game and another is Reimu herself trying to fix her messed up family but being conflicted about leaving Gensokyo) and find a way to have it end in at least a Bittersweet ending(frankly, I don't believe most of the girls deserve a happy ending with their actions, so I'll at least give them a Bittersweet one), your idea of having Gensokyo drop it's political war going on to unite under the same goal sounded really nice, however I want to instead of having them fix the issue by banding against a common enemy, have everyone be turned into a human with no powers and rebuild their lives from the ground up(it's the best ending I could give Gensokyo that doesn't involve going "It was all a dream" or "in the end, choosing your own path is wrong").
Phew! I hope I can get some reactions to the idea, I'm kinda shy about posting what I write because I'm really new and I really want to grow past just writing fan fiction and begin writing my own stories(I just wanted to write an alternate story to a really good series)