THAT bit of unreality is what offends you? Methinks you're stretching to find fault. It IS of course, Fantasy.
We're talking about a world where faeries, trolls, etc., live inside of the earth (undetected by humans) and utilize high technology the likes of which make us look like cavemen. (And might, at a stretch, explain that the Mpeg video in question DID leave traces of itself...)
I'm reminded of A.C. Clarke:
"Any sufficiently advanced technology is indistinguishable from magic."