Youkai Mountain didn't blow up, just the geyser part that connects to hell. Everyone is still standing on the peak, the most this has done was create a crater on the peak which Kanako could probably easily patch up if she wanted to. (Hell ZUN might even be making a deliberate reference to Yatsugatake's peak being shortened). Also Yuugi hasn't really betrayed anyone, she clearly states that in order to do her job the vengeful spirits need to be able to freely leave. A similar idea is that youkai need to be able to want to beat up Reimu and so Yuugi wanting give payback to the Hakureis is nothing out of the ordinary. (Though this does bring up whether Mizuchi is playing by spell cards rules and if it is possible to actually kill Reimu).
Though that explosion of spirits IS going to leave a mark, both physical and mental, to the mountaindwellers, who will be VERY annoyed at the ones responsible for it.
Though do keep in mind that Mizuchi has made it DAMN clear that she hates Reimu, the Hakureis and the way Gensokyo runs in general. So anyone assisting her will be considered a traitor-by-association. Hell, at this point, YUKARI might be declared a traitor, depending on how things go (Mizuchi's wording before possessing Okuu makes me wonder if she was talkinga about how everything is thanks to Okuu's idiocy or Yukari's machinations).
And with SEIJA around, she would LOVE to spread ANY kind of word that would cause chaos and mess with the system. And if Yukari DID help Mizuchi, Seija will concoct ANY lie to paint her as a traitor.
Yeah, the reset button might be needed in order to restore the status quo.