1. How well do the concepts in a book translate into reality outside its pages?
A literary work is an interplay between the author and the reader. What the author writes cannot be a fully accurate translation of what he means to convey; such are the limitations of language. So the reader likewise must fill in those gaps with his own experiences. In effect, a book reflects the reality of the reader.
For more on this I would refer you to Sven Birkerts in "The Gutenberg Elegies." There's an essay there on the relationship between author and reader.
2. What is the difference between a sci-fi fantasy story, and a mythology?
Fantasy stories rely on some degree of unreality, either in character, setting, theme, or plot. Scifi stories are essentially fantasy stories, but they rely on plausible scientific explanations of aspects of their unreality. The scope of mythology is broad, but I like to think that myths are fantasy stories that have come to wide and enduring acceptance within a certain culture.
I would also refer you to GK Chesterton's essays on fairy stories in his book "Orthodoxy" and to John C. Wright's essays.