The "sustained literary allusion to another work of literature" is no doubt, the idea that this novel seems to parallel the story of "Hamlet."  Consider the similarities: Edgar's mother, Trudy is Hamlet's mother Gertrude.  His uncle Claude is like Claudius.  Many even compare Almondine, though she is a dog, to the character of Hamlet's Ophelia.

The death of Edgar's father and subsequent visit by the ghost is the moment that seals for most reader the comparison to Shakespeare.  It immediately sets up the meaning of the novel to be a tale of murder and possible revenge.  Edgar's father has been poisoned by his own brother, and Edgar is the only one who knows.  As the story unfolds, the natural questions arise: How will Edgar be able to reveal the secret in a way that everyone believes him?  Will he avenge his father's death, and how?  And, will he go mad in the process?  Finally, in light of the fact that "Hamlet" is a tragedy, the big question is will Edgar die in the end?

Knowing this literary parallel before reading The Story of Edgar Sawtelle can act as a bit of a story guide but has the potential to ruin any sense of surprise.  Though the two stories do not match identically, even the author himself admits the similarities were intentional.