Well, almost a year later, I am going to try and resurrect this thread. I just finished The Sorcerer's House. I thought it was great; a very fun, quick puzzle-book. I am on the fence when it comes to the question of whether or not the events relayed in the letters actually happened. Wolfe lays plenty of clues that tell us Bax is not a reliable person, so why should we believe he is telling the truth in his letters? Can we assume that the collator is Bax, putting the whole thing in a more skeptical light?
I think the real point in the book that holds the key is George's single letter to Bax, challenging him to a duel. How did George get this letter to Bax? At that point in the story, George is lost in the house somewhere. Did he just leave the letter somewhere? Why not just wait in that spot for Bax to come by? The thing is, this letter is the one that most justifies in the mind of potential readers that Bax is the "good" brother, and George the "bad" one. At the same time though, perhaps it just shows that George is the one prone to hot anger, and Bax the cold, calculating one. All very tricky.
What do you think, are the events in the letters true, made up by Bax to tempt George out to the house (for the purposes of killing him and taking his place), or a mixture of the two? Do you thing Bax kills George, or do you think George goes to faerie, letting Bax take his marital life?