I've read through this entire thread and I've been reading through the colored Fairy books to get more inspiration, but there's one thing I've been puzzling over...
What happens if the PCs leave the path?
I'm about to go read your story hour to see if I can glean some more info from that, but was there something specific and sinister you had planned if they left the path, or would they simply become lost in the Other Realm without a way to get back to their own world? (not that that isn't sinister enough)
EDIT
Well, now that I've read the story hour, I can see they get wisked away and hopelessly lost. Was there a particular folk tale or myth you adapted this from, or was this your own invention for the sake of keeping the adventure moving without railroading the players?