It may help to consider the "Hildebrand Bubble" stuff as though it were a story being related by the Minstrel - though unlike the Minstrel's Ballads, which were exaggerated for action and drama, these episodes were exaggerated for comedy. All of the Hildebrand adventures DID happen; there was a mysterious thief, two detectives on her trail, and maybe a few comic escapades along the way - but the truly outrageous stuff? A goldsmith rebuilding a vase from fragments? The blackened-face explosions? Mile-high spinning piledrivers? All embellished for humor.

While it's true that it's never made explicit that the Minstrel is relating these stories, given that the Minstrel is hinted to be a stand-in for Yoshi P, one could argue that the entire game is already a story told by the Minstrel...