I wouldn't see Li Mu Bai as a full-on mystic. Rather, he is a martial artist who uses some system of theism, sorcery, whatever for his kung fu. He also has some mystic understanding, but I don't think he's gotten any magic (or kung fu) from it. At the beginning of the film he has failed some mystic test -- mostly because of his attachment to Yu Shu Lien but possibly because he has sunk his HP into ass-kicking rather than contemplation. He's willing to teach Jen Yu because she has the qualities that are required for great kung fu. She's not a bitch so much as a person who has been tightly constrained by society lashing out in rebellion (turning her Relationships with Family into various flaws, I suppose) -- given time, she might become a good person or, at least, a first-rate martial artist. Li Mu Bai wants to pass on his skills so he can rid himself of his attachments, not because he has any mystic secrets to impart.
Or that's my take on it; having not read the novel the movie is based on (and there's apparently a lot more of it), I'm not sure of all the details. Wu Dang (or Wu Tang) kung fu crops up pretty frequently in martial arts films and novels, and its practitioners are not necessarily mystics in the Gloranthan sense. Heck, the Shaolin masters that crop up in the novels don't seem like mystics, and they're Buddhist monks....
Peter Larsen
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