If Fateful Showdown's target becomes an illegal target, you won't discard your hand or draw any cards.

The number of cards in your hand is counted only as Fateful Showdown resolves. Fateful Showdown is on the stack at this time, so it's not counted.

There are many important moments in the story, but the most crucial—called “story spotlights”—are shown on cards. These cards have the Planeswalker symbol in their text box; this symbol has no effect on gameplay. You can read more about these events in the official Magic fiction at http://www.mtgstory.com.