Interesting development
I wonder who that guy is.
Other than that, I found no problems. There is nothing to correct (except , maybe, one-two small typos)
scavaging
? scavenging
On the background (although it probably doesn't apply to the universe of your fic): the world of "Lost Universe" is one of the four worlds created by L-sama. So canal is, as I saw it in the final episode, a manifestation of that world's top ryuzoku, Volfeid.
The incompatiblity lies in the basic principles.
The Slayers/Lost Universe universe has three poles: Light (ryuzoku, Canal) - Chaos (humans, L-sama aka God) - Darkness (mazoku). In short, Chaos is the God's stuff.
The SM universe has two poles: Light (Senshi) - Chaos/Darkness(enemies). Chaos is Devil's stuff. All the enemies of SM were created by Chaos, from Beryl to Galaxia (source: manga).
Completely polar theologic systems, as you can see. How do you resolve this to create a working merger?