"he dispenses talisman water, driving off the foul airs of the world of men.

符水 fú shuǐ is the everyday business of a village Daoist: a charm written on paper, burned, and the ash stirred into water for the patient to drink. It was the ordinary medicine of most of China for most of its history.

"He seizes the finest breath of heaven and earth; he gathers the flowering essence of sun and moon.

奪 duó is to seize by force, and it is a strange verb to boast with. The novel has already used it once in this chapter, in the market poem: snatching at profit and scrambling for fame.

"He works the yin and the yang until the cinnabar sets; he governs by water and fire until the embryo congeals.

This is inner alchemy proper. The practitioner's own body is the furnace, water and fire are the two forces to be balanced in it, and the 胎 — embryo — is the immortal body being gestated inside the mortal one. The vocabulary was borrowed wholesale from the older laboratory alchemy and turned inward.

"At twice eight the yin melts away — as if dim, as if dark;

The numbers are stages, not ages. 若恂若惚 comes straight out of the Daodejing, where it describes the Way itself as indistinct and elusive.