Perhaps the key to understanding Botkin is not to focus unduly upon what is real, but upon what is represented to be real over the breadth of the book before Botkin's role of author is fully revealed. You are right, the house of cards falls down. As far as I can tell there is no sure way to assert that Shade was a real as Botkin, or if, like everything else, doesn't merely exist in Botkin's mind and writings; which makes Botkin roughly analogous to VN. 

Nevertheless Botkin presents us with a character and a story, and it seems natural enough to ask the purpose of the tale even knowing that it is contextually fallacious. One answer is that Shade was real, and, as Jansy speculates, a homosexual. Perhaps by leaving signs and coincidences that lead the reader to form or embrace the notion that Shade metamorphoses into Kinbote, Botkin is revealing a side of Shade that Shade was unable to express in his poem. 

Another point is that VN wants the reader to feel the dissociation that a writer experiences as the work he has been laboring over, and inhabiting, draws to a conclusion. A writer has to imagine himself as his characters, however bizarre, and within his imaginative realm rules like a king, arranging events. Hence Botkin's desire to be called Kinbote and to be recognized as an exiled king, is only a rather small step beyond what all fiction writers presumably experience, exiled as they are in our greater world from that inner land of their own imaginings. Whence arises our own disappointment with Botkin and his role as destroyer of contexts, and of the suspension of disbelief. And thus Pale Fire ends in an unraveling of its narrative illusion or tapestry. 

The other point though is that Kinbote's Notes, or Botkin's Tale, can still have meaning and purpose along the same lines that existed before Botkin was revealed. Seen as false in the outer frame, they still have the force of illusion in the inner one.