I think the problem here is that you're mistaking "setting up a mystery" with "failure to establish a setting". The latter is the problem.
You can set up a mystery, or something suspenseful, that is discovered as the story goes on. However, before you do that, you have to establish the setting, so that we can understand what's going on.
This goes double for a fanfic, since you're working with an established setting, and the audience will be expecting that. And before you say "Oh, but then every story can only be a repeat Grail War" or something; that's not true. At all. So as long as you properly establish that the story is in the Nasuverse, you can have a magus from the Association fighting vampires on the other side of the world for all I care.
Let's just look at the first chapter as an example. Remember, first chapters are supposed to hook readers, catch their attention, even for a bit.
You start OK-ish, with some familiar names and setting up a mystery for the plot later. However, we have no idea what's going on. Normally, you set up the setting, so that we can have some basic understanding, then set up a mystery upon that setting.
Though, no bigie. You can still set up a mystery without us knowing what is going on about it IF we can have something understandable as a crutch. Say, introduce a mystery with Unknown Villain X in a flashback, but then continue to a scene with Shirou in the present. We know Shirou, and even if we go AU, this moment establishes the setting and helps us understand it, even if the previous scene made no sense to us.
And here comes the problem; the very next scene makes no sense to us. We don't know what the hell is going on, a lot of the characters we don't even know who they are, or what relationship they have; we have nothing. Nothing to cling to for understanding. This is the main problem we have here: you've failed to establish the setting. We have no idea what's going on, and we don't even have something to act as an anchor, so we lose interest and don't care about it.
It's not that what happens is absurd; it's that we have no connection to what's happening. If in the previous example I had Shirou suddenly pretending he's a superhero, silly costume and all, at the very least, if I work properly in his characterization, we have a connection to the setting there, even if it's absurd. But we don't have that here. And because of that, the hook fails.
And this isn't even taking into account the amount of SoD breaking.
That's the issue we have here. You can have your mystery if you want, but you need to set up the setting properly so that we actually care about that mystery. You can't expect us to wait 40 chapters just for that; nobody's gonna wait that long. People tend to at most give a story three to five chapters before dropping it. Some even less.
Without establishing setting, we will keep questioning everything we see, because it isn't familiar to us. It looks nonsensical, arbitrary. For example, several dead characters are now alive, and Servants now have physical bodies. Why? Is it part of the mystery? If so, why aren't we focusing on that? It's related to what we know, and it's obviously different from the established canon. So, of course, we're gonna want answers about that. But, nope; let's have space wrestling matches; that's obviously more important to establish than the differences in this setting from what we know.
So, no; don't confuse adding mystery and suspense with establishing your setting.
Also, by the way, don't use the multiverse thing as an excuse. Yes, the Nasuverse follows the idea of a multi-verse. But the Nasuverse already has some rules set in stone, which will never change no matter which universe it is. Because they are all the same universe; a different universe will not differ in how it works, it'll differ in how things happen.
Characters taking different choices, being born with different abilities, unto different families, different times and action...all of those factors can change, but they all still respect the universal laws set there. Magic will still be the same in one universe or the other, even if in one universe Shirou uses swords, and in another he uses lances. And every change has causes and effects, which HAVE to be taken into account.
