Yeah, I do understand that the right way to translate is the hardest part that prevent me from actually try to write one. Many words are without alternatives either: the puplpil who came under the master before you and after you have specific noun to show their seniority etc.
It's the same thing as senpai, kouhai, sensei, nii-san etc in Japan. I noticed in official translation of manga etc they often ommited those titles and replace with characters name. It make sense for westerners because they don't call their sibling " big brother", the stranger lady who is older than you "sister". For Asian, they would consider calling name out rude, and I wouldn't be able to take it seriously if Alphone Elric start calling his brother " Edward". So yeah I understand your concern about confusion it might cause.
I recommend "master" because that words was a favorite in manga translation and Japanese isn't less varied than Chinese when it come to pronoun, I believe most English reader could interpret the difference between "master"- teacher and "master" -owner. The prerson who make the round medicine thing ( what is that called in English again) would be weird to be called potion master tho.
Back to topic, when I was a beginner in the genre, most of the book i read were beginner friendly with detailed explanations on how immortal cultivation works, so I still think some explanation is still required. The specialize nouns, if you don't want to switch them, you might want to add a dictionary system that highlights the words when it first appear and show the english meaning of the text when player click on them (I might have heard of a Renpy code that does that). The advantage of VN is that we could make use of programming to our advantage. I understand that it would be too much trouble for short game xD.
About the clothes, yeah I'm totally not confident to draw them. How many layer of robes, which side going in first, how does the inner layer looks like when they are taken off for a H scene etc require a lot of research. And the problem with Chinese name is that it's hard for a non-Chinese to name a character in Chinese because they are so language specific. It's also hard for a non-Chineses to write something in another ancient culture (though fictional but based a bit on reality). Western style VN is easier probably because the whole world is modernized following the west, and there's not as many hard rule (or if there are, people broke them often enough that the broken rule became the norm).