How does death work in Gensoyko?

Question

In Touhou 6 ~ The Embodiment of Scarlet Devil, Reimu Hakurei defeats Sakuya Izayoi several times in battle. Once defeated, she proceeds to meet Remilia Scarlet, in which the following dialogue occurs:

Remilia: I knew it. Humans are useless.
Reimu: Was that maid really human?
Remilia: You. You're the murderer.
Reimu: Don't worry, it was only one person,
so it's not like I'm a serial killer.

Since Sakuya Izayoi, the person in question, appears in later works in the series, and no mention of her being reborn or in any other way "back from the dead", I am somewhat confused by the statements made above by both characters. Is Remilia being sarcastic and Reimu is playing along?
Likewise, in Touhou 8 ~ Imperishable Night, when playing as Youmu Konpaku and Yuyuko Saigyouji, they face Mystia Lorelei, a night sparrow. Before their fight, Yuyuko says she does not like [eating] sparrows, as they are too bony for her. After the fightm the following conversation between Youmu and Yuyuko occurs:

Youmu: That night sparrow's appearance is going to attract
lots of youkai and other things, before long. Let's move on before that happens.
We have to hurry.
Yuyuko: Hang on. Got a bone in my throat...
Youmu: Didn't you just say you didn't like sparrows?
Yuyuko: It's not good to be a picky eater, Youmu.

To me, this implies that Yuyuko not only killed Mystia, but indeed also ate her. But again, this contradicts the fact that Mystia appears again in later installments of the series, namely Touhou 9 ~ Phantasmorgia of Flower View and Touhou ~ Hopeless Masquerade.
Unlike the above mentioned examples, Yuyuko Saigyouji's backstory tells of her having been a human priestess a long time ago, and committing suicide in order to seal away the powers of the Saigyou Ayakashi. However, instead of her soul simply resting in the netherworld or any other place, Yuyuko became a ghost princess. This at least shows one instance in which a character's death had a permanent impact on who or what they were.
All of this begs the question: How does death work in Gensokyo? When characters are defeated in battle, do they "die" in some meaningful way? Is death simply a minor inconvenience? Or did the characters never really die, and others are simply pretending as if they did - akin to some dark humor?

It should be noted that the original work is in Japanese, and that the quotes I provided are from the english Touhou Wiki. I assumed that these translations are as accurate as possible.

Showsni · Accepted Answer

In a Q and A (found in archive form here), the creator likens the battles in Touhou to professional wrestling; from Google Translate:

Q. Is the reason for fighting one-on-one in "Gensokyo" to directly enjoy the fear of the border between life and death?

A. I'd hate such a murderous Touhou ^^;
Actually, I wonder if humans can enjoy being on the edge of death? It's customary in comic books, but ...
Rather, Touhou is like professional wrestling. The spell cards are like professional wrestling techniques.
How often do professional wrestlers kill each other!?

As such, you shouldn't view any deaths in battle as actually killing each other. The whole tone of the dialogue in the games is usually somewhat jokey and sarcastic, similar to a boke and tsukkomi comedy act where usually one of the fighters will say something ridiculous and the other will take the role of the straight man to correct it.
Talking of Reimu's fight with Remilia, another of the questions asked was:

Q. Were Remilia and Reimu also just playing in "Gensokyo" (I'm a bit sceptical)?
A. A fight to the death, the mission of a huge organization, unavoidable or despair, etc.
You can see that it is not that kind of a battle.
In Gensokyo, the number of humans increases and decreases, but the number of most creatures hardly fluctuates.
The reason why everything that lives inside can live in peace and wealth is because there is a culture built by humans and youkai who have lived for a long time.
Therefore, if you try to kill or take control, the balance of Gensokyo itself will be lost and you will self-destruct.
Since the youkai know that, they can coexist without fighting ugly like humans.
The human beings in it are in the category of powerlessness in Gensokyo, but they are also indispensable gears.
Of course, humans and youkai, or youkai (humans) may fight each other.
However, the battle result is not important, it is the battle itself.
Although we will fight seriously, there is not much seriousness saying that we should win or not win.
Therefore, no battle scars are left even after the battle is over. (nice)

So although they do fight seriously, they don't care overmuch about the results, and rarely hold grudges after a fight.
In a different interview (you can find it here), ZUN mentions that extra lives are akin to the girls showing more guts;

-"What do the so-called "remaining lives" indicate in Touhou?" (Zaku, 25 years old)
ZUN:
The remaining lives are guts, that is guts! (laughter in the venue)
When they get a  great score, the game characters get more guts. They're happy! (laughter in the venue)
To tell the truth, I thought about the remaining lives for a little, but I wonder if guts will increase after all.

and that thanks to that, they can shake off seemingly lethal attacks:

-"It's called "pretend danmaku", but I think you'll die if you're hit by a throwing knife. What's the deal?"
ZUN:
That... it depends where you're hit (laughter in the venue).
But yeah ... you'd be pretty dead.
Although it is offset depending on the location. Actually, it's enough to do it ... Well, if you're hit, you'll die (laughter)
You're talking about pretend danmaku barrage, but ... you'll die? (laughter)
Innocence is really cruel.
-So, isn't it usually a fatal injury?
ZUN:
Yeah, sometimes you'll die, but ... well, if you have guts! (laughter)

Overall, it seems that you shouldn't ever view fights in Touhou as having serious stakes. It's rather like a Tom and Jerry cartoon; Jerry might blow Tom up with dynamite, but he'll be just fine in the next scene. Even if the house gets destroyed, it'll be standing again in the next episode. Although they fight seriously, neither of them is really in any peril; even if they get killed and float up to heaven playing a harp, they'll be back to their usual antics next week.

How does death work in Gensoyko?

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