The chapter "names" are made-up summaries neither taken from the novel nor the translation. The subscripts in this article are the original novel's chapter headings (which are really quotes from the chapter) and the translations thereof are (mostly) from RainbowSe7en's translation.
This arc is a three chapter interlude which recounts a version of the daoist Chinese creation myth and Zhao Yunlan's dreams/memories of Kunlun. These three chapters have been translated as past tense, as opposed to the rest of the novel, which is in present tense.
Chapter 76 - Kunlun's Youth
那天赵云澜走进大神木，其实并不是只拿了一根功德笔 - When Zhao Yunlan went into the holy tree, he took with him more than just the Ink Brush of Virtue.
The chapter starts with Zhao Yunlan jumping into the Tree of Virtue - which happened earlier in the story (chapter 73), while the battle on top of Mount Kunlun was taking place. He lands in a desolate, pitch dark space. The only thing he sees is a sparkle in the distance, with turns out to be the Ink Brush of Virtue. He walks towards it and picks it up.
It then apparently shows him a creation myth, telling him more about his (Kunlun's) past:
In the beginning, Pangu, with his axe, split chaos into light and dark - heaven and earth. Then he died and became sun, moon, and the five great mountains of China. The head of his axe became Mount Kunlun. After Pangu, there were the three Sovereign gods: Nüwa, her brother Fuxi, and Shennong.
Zhao Yunlan seems to be watching all of it from the sidelines, aware that he is Kunlun. Kunlun is described as young and mischievous, a terrible nuisance for everyone, until Nüwa gives him a kitten to play with. It helps, since keeping that kitten alive seems to take all of his attention. He makes a golden bell for it that lets the kitten cultivate and get smarter, which explains Da Qing's unique position as a cultivated cat.
When the kitten is grown, he and the cat go down the mountain to see Nüwa forming humans out of the earth and then taking a rope and swinging it around to form more humans. Kunlun realizes that that might not be ideal, since the earth is the place where all the world's evil resides. He exclaims, "Humans are great, so innocent, yet they carry with them the things I have heard from beneath the earth even before I was born." Nüwa sees future calamity and despairs. But it's too late, the humans already exist and Nüwa doesn't want to kill them all again, so her brother sacrifices himself to create the Eight Trigrams which can bring order to the world. With the help of the trigrams, the two sibling gods build the Great Seal, which confines the evil to the Underworld. Nüwa asks Kunlun for a branch from the holy Tree of Virtue and plants it at the Seal. She names the land behind the Great Seal "The Land of Great Blasphemy".
Time passes. The branch of the Tree of Virtue planted outside is withered. Fuxi is not seen again. Kunlun weeps and his tears form the Yangze. Nüwa goes into seclusion. Thus the Three Sovereigns fade away, and Kunlun grows up. He understands that it was reasonable to lock away the demons in the Underworld, but he also loves the humans, despite their dual nature, godly and demonic. He admires their capability for strong emotions, even though they are prone to "bloodshed and warfare", reflecting the Three Corpses within (here greed, hatred and igorance).
Wars constantly rage, and Kunlun stays out of them. A great war between the Yellow Emperor and Chiyou happens. When Chiyou, the God of War, realizes that he is about to be defeated, he comes to Kunlun to beg for help. But since Kunlun was living alone on a mountain for all his life, "his heart grew to be as cold and hard as the mountain peak." He refuses to help, but Da Qing shows some compassion.
Chapter 77 - Kunlun meets the young Ghost King
在这个世界上，难道只有不够强大、又足够蒙昧，才能短暂而愚蠢地活下去么？ - In this world, are only the feeble and the foolish allowed to live brainless and brief lives?
Chiyou dies, but the Yellow Emperor, impressed by his bravery, names him the God of War posthumously. Because Chiyou is viewed as the ancestor of demons and fairies, and he tricked Da Qing into "licking and swallowing his blood", Kunlun has no choice but to promise Chiyou he'll protect all demons and fairies living near mountains and rivers.
But Kunlun doesn't do any more than that, sitting idly by and waiting out a few great wars between mythic figure representing various groups throughout Chinese history. Kunlun is very disappointed that it seems to be their fate to fight and suffer.
A giant war begins between the descendant of Shennong, Gonggong the God of Water, and the descendant of the Yellow Emperor, Zhuanxu. Dragons made by Gonggong and the demons and fairies join in as well, on different sides. Kunlun promised to protect them both, but now they are fighting on different sides. Many tribes fall, and there are the living and the dead howling from the battlefields. Kunlun despairs of destiny.
When Gonggong loses the war, he flies to Mount Buzhou on his dragon. According to this version of the legend, "Kunlun heartlessly stabs the godly dragon in the eyes" and thus Gonggong crashes into Buzhou. This damages Fuxi's Great Seal, letting out all the demons trapped in the Land of Great Blasphemy.
Kunlun uses the soulfire from his left shoulder to awaken all of the Underworld, and destroys the Heavenly Pillars so the sky collapses, which is the first step for cutting off Heaven from Earth, freeing Earth's inhabitants from Heaven's will.
During that time, Kunlun grows up, and Nüwa returns. He tells her: "I'll make an ink brush from the dying branch of the holy tree [...] so all living souls can write their own destiny." He hopes to free the world of its suffering that way.
Heaven punishes Kunlun for his defiance, raining down thunder and lightning for days, repeatedly striking him, but it seems to have no effect. He keeps regrowing flesh and skin and laughs in the face of fate.
Kunlun walks down from his mountain and sees countless spirits from the Ghost Tribe. They're not connected to humans who have died, but they have grown from the "evil energy sealed in the Land of Great Blasphemy". They are all of them described as mad and bloodthirsty, but they have different forms, depending on how evolved they are: the lowest have "no discernible shape, sloshing around on the ground like muck," then there are "roughly humanoid" ones with "distorted faces and a savage temper." The more they evolve, the more human they look. At the top of the hierarchy are two Ghost kings. They are described as looking "like an angel; as if the filthier the creature, the lovelier the appearance."
Passing through a peach tree grove at the foot of the mountain, Kunlun encounters one of the Ghost Kings. This is the first description we get of him: "It was a youth with dark eyes and dark hair. He sat on a giant boulder, barefoot, his long hair spilling over his shoulders, wearing clothes made of rough garments." His skin is described as "white as snow" and when he opens his mouth, he is seen to have "pointed canines". When he sees Kunlun, he is so shocked, he falls off the boulder into the water of a small stream.
Kunlun watches him kill an Underworld beast with his bare hands and then proceed to eat it. The Ghost King seems in awe of Kunlun, and when he notices Kunlun watching him, he stops feeding and even wipes his lips, "as if he thought that wiping the blood off of his mouth would make him look neat and clean."
Kunlun feels drawn to the young Ghost King and asks for his name. The Ghost King answers "Wéi" (嵬), which means mountain ghost - it also means rocky; it's composed of the mountain radical over the ghost radical. Kunlun then suggests to make the name more magnificent and suggests he call himself "Wēi" (巍), meaning lofty or towering. However, it's also the same tone as wēi for spiritless/soulless.
Chapter 78 - Kunlun's Later Years
“我不喜欢，不如不生。” - "I don't like it. I'd rather not live."
When Kunlun asks why the Little Ghost King isn't with the rest of the Ghost Tribe, he answers that they're dirty, and that he doesn't want to be near them. "What else do they know but to kill and to eat?" When Kunlun points out that the Ghost Tribe is like that, the Little Ghost King asks, "Must I be the same as them, purely because I was born of the Ghost Tribe? [...] I don't like it. I'd rather not live."
The Little Ghost King tells Kunlun that he likes to look at the world. Kunlun starts explaining how much nicer everything is to look at when it's sunny, but that won't happen anymore, because he pierced the sky to set the Ghost Tribe free. The Little Ghost King asks why Kunlun pierced the sky. Kunlun-Jun says it was a promise. The Little Ghost King says that if he'd have known how beautiful the world outside the Great Seal was, he'd have pierced the sky too. Kunlun says, "Preferring not to live if you can’t make your own choices. Looks like I've met my soulmate."
Kunlun starts walking across the earth and doesn't mind that the Little Ghost King keeps following him everywhere.
Kunlun holds up a hand and Mount Penglai springs up from the earth. The demons and fairies go there to shelter from the storm and subsequent flood, in which a lot of people die. Kunlun, with the Little Ghost King following, arrive at Mount Penglai. The demons have brought Chiyou's descendants, and Houyi has brought his people, kowtowing every step just like his ancestor. Kunlun doesn't respond to their prayers. Then from the West comes another group of people led by Shennong, now an old man with a medicine basket. Zhuanxu follows the old man reverently. Kunlun recognizes Shennong.
Kunlun said previously he would destroy Zhuanxu's people and all of humanity, but he never did. Now he watches as Shennong and his people struggle up the mountain, Zhuanxu kneeling and thanking Kunlun for creating Mount Penglai, Shennong not saying a word and instead slapping Kunlun when he appears. The Little Ghost King is about to attack Shennong for this, but Kunlun stops him. Shennong tells him that he did what he set out to do and then tells Kunlun that because he was born of the mountains of the Earth, he is connected with the chaos and menace of the Underworld and carries with him the three souls of Pangu's axe. He says that Kunlun fails "to consider the long term, [...] to tell right from wrong, good from evil, life from death." Then he asks how Kunlun dares defy the Heavens and says that his boldness is bound to be doomed.
The flood waters continue to rise, pushing the groups further up the mountain. The demons and fairies begin fighting again. The war continues. Many from each tribe die. Descendants of the Flame and Yellow Emperors ally with the descendants of Chiyou, and together they struggle to survive. These are various events that can be found in the Records of the Great Historian (Shiji) / China's foundational mythology.
Nüwa repairs the skies by taking the four limbs of the great tortoise Ao as the new sky pillars, exhausting herself. The Ghost Tribe plagues the lands. The new four pillars tremble. The sky tilts (another thing from China's foundational mythology). Heaven and Earth are merging, and the Ghost Tribe is devouring the whole world. Kunlun still sits atop Mount Penglai like a statue.
Shennong goes to tell Kunlun that Nüwa has sealed the four pillars to secure them and that she plans on sacrificing herself to stabilize Fuxi's Great Seal, and that all Sovereigns, and Kunlun, will die, as it is fated. "No-one can resist that. The problem is you know too much."
Kunlun says to Shennong, "Chiyou asked me to protect the demons and the fairies, and now fate has me decide which to save, or else they shall both perish, is that it?" When Shennong says nothing, Kunlun says, "Save the fairies." Shennong knows by this that he has compromised.
The flood subsides; Nüwa has greatly injured the evil Ghost_King who was wielding a giant axe like Pangu had. Through turning into Houtu, she repairs the break in the Great Seal and forces the Ghost Tribe back under it, but is no longer powerful enough to repair it completely, so it remains unstable.
Kunlun now knows he is going to have to die.
"A few thousand years ago Shennong said that I am destined to a miserable end just as my miserable beginning. I was born Ghost King, and will always be, and if you won't leave me, one day, you will meet the same fate." - Shen Wei to Zhao Yunlan after finding him with a knife in his heart.
"Even my soul is black. There is only one place in my heart I have left for you, where the blood is still red. I am willing to use it to protect you." - Shen Wei