How does Irving use magic and fantasy in his American Folklore stories, and what effect do they have on character and plot development?
I'm trying to focus on "The Legend of Sleepy Hollow" and "Rip Van Winkle".
The thing to focus on in answering this question would be the way in which Irving deliberately creates a setting for these two stories that places them in the heart of fantasy and which stresses the power of the imagination. These are key aspects to the stories that help us understand the actions (plot developmenty) that follow and the protagonists' reactions (character development) to what occur to them. Let us remember how Irving describes the setting in "The Legend of Sleepy Hollow":
A drowsy, dreamy influence seems to hang over the land, and to pervade the very atmosphere. Some say that the place was bewitched by a high German doctor, during the early days of the settlement; others, that an old Indian chief, the prophet or wizard of his tribe, held his pow-wows there before the country was discovered by Master Hendrick Hudson. Certain it is, the place still continues under the sway of some witching power, that holds a spell over the minds of the good people, causing them to walk in a continual reverie. They are given to all kinds of marvellous beliefs; are subject to trances and visions; and frequently see strange sights, and hear music and voices in the air. The whole neighborhood abounds with local tales, haunted spots, and twilight superstitions; stars shoot and meteors glare oftener across the valley than in any other part of the country, and the nightmare, with her whole nine fold, seems to make it the favorite scene of her gambols.
There is a deliberate reference to magic and mystery, with phrases such as "haunted spots," "superstitions" and the way that the locals walk around in a "continual reverie." In the same way, if we look at "Rip Van Winkle," the Catskill mountains, which is where Rip experiences his own reverie, are described in equally mysterious terms:
Whoever has made a voyage up the Hudson must remember the Catskill Mountains. They are a dismembered branch of the great Appalachian family, and are seen away to the west of the river, swelling up to a noble height, and lording it over the surrounding country. Every change of season, every change of weather, indeed, every hour of the day, produces some change in the magical hues and shapes of these mountains, and they are regarded by all the good wives, far and near, as perfect barometers. When the weather is fair and settled, they are clothed in blue and purple, and print their bold outlines on the clear evening sky; but sometimes, when the rest of the landscape is cloudless, they will gather a hood of gray vapors about their summits, which, in the last rays of the setting sun, will glow and light up like a crown of glory.
These are "fairy" mountains indeed, as the text goes on to say, foreshadowing the magical experience Rip has on their summit and showing how magic enters the lives of the ordinary characters.
In both texts therefore, magic and mystery are key elements of the story. In one, of course, it is the protagonist's susceptibility to be taken in by such magic and mystery that is essential to the story, whereas in the other, the impact of the story focuses on how an enchantment changes the life of its protagonist after his enchanted sleep. In both stories, folk legends and magic are used to enable Irving to achieve his plot objective. In "The Legend of Sleepy Hollow," he shows the danger of having to active an imagination, and in "Rip Van Winkle," he uses the enchanted sleep of Rip to comment ironically on the massive change that occured in America thanks to the Revolution.
Irving was consiously attempting to produce "American" fables. Fables traditionally rely on "magic" if you will, to move the story along. It was a somewhat unusual approach, given that Irving was smack-dab in the middle of the Age of Reason.
As I said, though, his was a conscious attempt to produce these, unlike the traditional fables of Europe, that developed over centuries (at least) from the oral tradition to, finally, the written. Using "magic" allows writers of such stories to skip over certain aspects of the story such as "what caused Rip to sleep so long," and use of the supernatural as a causative element.
Modern science fiction can be used in comparison; SF (real SF) explains everything. You don't go back in time by snapping your fingers and spitting over your left shoulder. Modern fantasy is more like traditional folklore (such as Irving was creating) in that while such things are described as having a cause in some (typically) universal energy source (think: Star Wars' "force"--Star Wars is science fantasy, not SF) that "adepts" can tap into.
In Irvings case of very early "fantasy" if you will, he was tapping into supernatural forces such as the "trolls" on Rip's mountain and the headless ghost.