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I always thought Gensokyo would make a decent Mount Olympus style home of the gods, where all the touhous were just deities among their kind, or among groups of people. Mystia would be deity (or just ruler) of the night sparrows, which I imagine to be an evolved form of harpy with more song powers.
Characters like Reimu or Sanae would have started out as humans and taken the interest of established members of the pantheon enough that they were elevated, and now serve as guardians of the human race (since gods friendly to humans are vastly outnumbered by the unfriendly ones). Marisa would have stolen her place in the pantheon, of course, although she'll insist she's just borrowing it.
For the world setting, then, you can take Gensokyo and expand it. Human Village becomes Human Kingdom - surrounded on all sides by either untamed magical wilderness, a kingdom ruled by vampires, and the mountainous region inhabited by the flying monsters among others.