Final answer:
The tale of young Merlin revealing the cause of the collapse of Vortigern's castle is from Arthurian legend, which is not to be taken as historical fact. The detail about his blood being used is a myth. William of Orange's eligibility for the English throne through his marriage is true.
Step-by-step explanation:
The story of young Merlin being brought to the court of King Vortigern is from Arthurian legend, which is a rich source of narratives that combine historical elements with myth and folklore. In various versions of these tales, Merlin is indeed presented as a boy who uses his prophetic powers to reveal the real reason behind the collapse of Vortigern's castle and ultimately saves his own life. This question, however, seems to blend the Arthurian legend with disparate literary references which are not directly related to Merlin or Vortigern’s story, such as the excerpt featuring Ethelred and a dragon, or the discussion on magic arts, which do not correspond to the historical accounts or standard Arthurian tales.
To clarify, the actual legend says that Merlin disclosed that two dragons were fighting beneath the foundation, which was causing the collapse of Vortigern's attempts to build a castle. He did imply that Vortigern's reign was illegitimate, but the detail about Merlin's blood being used is part of the myth and not historical fact. Also, the latter question regarding William of Orange being in line for the throne of England through his marriage to James II's daughter, Mary, is indeed true.