I've just read the ESoD manual backstory again (
wiki here, very poor translation with errors, but doesn't affect the part I want to talk about), and it's the clearest evidence that the current Touhou universe was only established in PCB. In that backstory, Gensokyo was not separated from the outside world by any magical barrier, so Reimu was afraid that when the red mist spread to the human village(s) (which were not part of Gensokyo), humans would be alarmed of Gensokyo's existence, thus come and destroy Gensokyo. The red mist was also deadly for humans ("in such thick youkai miasma, normal humans can last less than 30 minutes, and non-normal humans only have 30 minutes to last").
The CD-R version of DiPP which "Death of the Honest Men" came from was released alongside ESoD during C62 (August 2002). ZUN would completely replace the story when he re-released it during C63 (November 2002). This doesn't necessarily mean "Death of the Honest Men" is no longer canon, but it does mean the Gensokyo it writes about is the Gensokyo of ESoD, which is a very different place from the current canon.
I'm not saying you shouldn't base your theory on "Death of the Honest Men" or heck, anything pre-PCB; on the contrary, I think there's nothing wrong with theorizing for fun and brain gymnastics. I'm just saying the current canon only began to take shape around PCB, and if you seriously want to understand ZUN's perspective, there are contexts you can't ignore.