When a Faction executes an Event, it carries out the Event
Then 5.1.3 adds:
An executed Event’s text that can be implemented must
be. If not all of its text can be carried out, implement that
I take that to mean that if the event says "place 2 Tories" and only one is available (playing a bot that cannot replace) then you would place the one or if "reduce Pat. resources by 3" and they only have 2 you would reduce by two.
More simply, does 5.1.3. modify the general "literally" direction?
In the specific case where it is impossible to execute everything in the Event text, yes.
Note that 5.1.3 never modifies requirements on spaces; e.g., if an Event text specifies "a Colony with Villages" and there are no Villages in any Colony, then the Event text cannot be executed at all.
Am I also correct that this is not the case with the British Muster, where when placing Tories if you do not have exactly 2 you cannot place 1?
Correct. A British Muster is not an Event, so 5.1.3 does not apply to it.