Why didn't Tolkien believe the fantasy genre was incompatible with science fiction?
Genre boundaries were put there to sell books in bookstores, not tell you how to write a story
In an essay about Fairy Stories, no less than J.R.R. Tolkien himself once opined:
Fantasy is a natural human activity. It certainly does not destroy or even insult Reason; and it does not either blunt the appetite for, nor obscure the perception of, scientific verity. On the contrary. The keener and the clearer is the reason, the better fantasy will it make. If men were ever in a state in which they did not want to know or could not perceive truth (facts or evidence), then Fantasy would languish until they were cured. If they ever get into that state (it would not seem at all impossible), Fantasy will perish, and become Morbid Delusion.
No one informed him that the bookshelves at Barnes & Noble are well-marked to distinguish rational science fiction from silly fantasy stories, clearly.
He continues:
For creative Fantasy is founded upon the hard recognition that things are so in the world as it appears under the sun; on a recognition of fact, but not a slavery to it. So upon logic was founded the nonsense that displays itself in the tales and rhymes of Lewis Carroll. If men really could not distinguish between frogs and men, fairy-stories about frog-kings would not have arisen.
Ain't that interesting?
The grandmaster of the modern-day fantasy genre, the trope-setter and theme-maker, was of the conviction that a fantastic story is as real as it gets.
A fantasy story well-told doesn't flee from reality. Fantasy stories are steeped in reality.