If so, Kasen shouldn't be able to use magic in the outside world for 3 days to look for her arm. Beside, the lunarian also used magic, and is connected to the mystic, so it's not exactly true that magic will disappear from the world. The reason Gensokyo is seperate from the world isn't related to magic in the first place, it's to give haven to the mystic that's soon running out of place to live from the world full of skeptisim and science.
In the first place, it's not like magic itself disappear. Rather, it's the Magic user that disappear due to the world favor for science instead of magic.