What satire can be found in "The Legend of Sleepy Hollow"?
This is obviously a story about stories and storytelling and the limits of the imagination, and Irving carefully constructs his satire to focus on the dangers of believing in stories too much and trangressing the boundaries between fiction and non-fiction. He chiefly does this through the character of Ichabod Crane, who is presented as a man who does not understand the limits of imagination. He is obsessed by his dreams of marrying Katrina Van Tassel:
...soft anticipation stole over his mind of dainty slapjacks, well buttered and garnished with honey or treacle, by the delicate little dimpled hand of Katrina Van Tassel.
However he is unable to live up to those dreams and is genuinely shocked by Katrina's refusal. His lack of discernment is key in the way that Brom is able to trick him, because he is unable to identify that the legend is just that: a story. This is of course linked to the postscript of this tale, when the wise storyteller is very clear about his perception of fiction and reality:
"Faith, sir," replied the storyteller, "as to that matter, I don't believe one half of it myself."
Thus the target of this satire is our own tendency to blur the boundaries between stories and reality, and the way that we leave ourselves exposed when we do so, just as Ichabod Crane did. We must heed the message of this story and never let our imaginations get the better of us.