It's made clear in GoM and StB/DS that danmaku can be anything you want; the whole purpose is to have that thing hit the opponent, so what it actually is doesn't matter. Hence you get things like the Minoriko sisters literally throwing sweet potatoes and leaves and rice at you, Komachi and Nazrin throwing actual coins, etc. The physics of danmaku, however, is generally ignored, or at least shoved aside. It can cause some damage like scratches and torn clothing, but it is clearly nonlethal and probably doesn't do much physical damage. Or, it's possible that the combatants are protected magically somehow and the danmaku can affect the surroundings, but this is total speculation, as any spell card duels shown in manga and whatnot don't really do anything.
Sakuya's knives are actual knives, as implied by her using silver knives in particular, mentioned in at least PMiSS and the IN manual. She's also been hinted at to have to throw her knives then go pick them up, which is also sort-of-supported by GoM.
Memorizable Gensokyo: Yes, the term used (妖怪の賢者) is the same "sage" as is used the few times in PMiSS and the once in SA. It's done very explicitly to show that Yukari does indeed edit the Gensokyo Chronicles, and that when you hear "sage", it does mean at least Yukari.
