Okay, how about this:
Each dimension has its own Darkness Beyond Time, which does exist as a physical place in some finite quantity of space, almost like an "underworld" of the timeline. The DBT is naturally a closed system, as is the normal timeline.
When a timeline is erased, it is subsumed to the Darkness Beyond Time, then immediately starts being "dissolved" and recombined to compose the new timeline according to the actions of the time traveler. Fan creators can even write the existence of a temporal backlog; like the tenth oldest timeline is the one subsumed to create the newest, meaning one can access and study the last nine discarded timelines in the Darkness Beyond Time at any one time. In fact, we need a backlog of at least some quantity for those visions of past timelines in the Darkness Beyond Time to exist.
And as for the issue of Schala... When she fell into the DBT, can we say that an equal mass of air, potential energy, etc. rushed out, preserving the balance of each in both the DBT system and the universe system? Sort of like displacing water, which rushes into the system from which the displacing object came from.