I think even Oda forgot that this was supposed to be about Loki and Harald. As glad as I am to finally know the full story of what happened at God Valley, this was a weird time to go into all the details.
In a manga where people can teleport other people to them, shoot laser beams out of their fingers, or control the wind, I don't think someone producing lotion from their skin is all that far-fetched.
If you're talking about page 14, they're leaving her apartment. The fantasy starts at the bottom of page 7 (I think both panels), so them going to her apartment was reality. She was wearing the jacket when she answered the door but it's unclear if she was wearing pants over the rest of the...
Also Lavi is going to be on her side no matter what, so he'll convince the others not to turn against her. I expect the elf girl and Daniella will have their back, too.
Also good plot twist. I can't believe I didn't see it coming. Now the question is why were they being put into items and why...