Well, let's go back to that book itself. It's a super-powerful magical tome capable of bending reality to its user's will. It shoved them all into a purely illusory world that created itself from the ground up, being added onto as the few "real" people needed. Essentially, it gets made up as is necessary.
The biggest thing to suggest pure illusionary fantasy world is the "judge" system. Remember that snowball fight where the fight was interupted when everyone targeted Mewt? That gave him the desire for special rules to govern fights. Thus, desire granted.
The world also acted to DEFEND itself. When Monte said he remembered always being in Invalice- it wasn't because he actually had memories of the world from before it was created- it was because the fantasy world needed him to suddenly have this prior knowlege. For one thing, to stop all the "ok, this isn't real" stuff. And for another, to help out Marche- one of the things that the wish included.
EDIT: I recant some of that prior statement now. Just started the game again. You get to see images of the creatures and whatnot in the book itself. So, at least part of it needs to be set in stone, not transmutable. Whatever it was, portions, at least, were created from something other than the imaginations of the few who retained memories.
