This story can be read in two ways. Superficially, it seems to suggest that the events of the 1960s Dalek films are fictional parts of the DWU; the Doctor is entertained by "that young chap sitting on those chocolates", a reference to a memorable moment for Roy Castle's character in Dr. Who and the Daleks. Later, two elderly ladies sitting next to the Doctor — who have disapproved of his outbursts of amusement — exclaim that they wish the Doctor would develop the manners of "that lovely Mr Cushing."
However, careful reading shows that the films are never mentioned by name and the word Dalek doesn't appear anywhere. The reader is free to imagine that things aren't quite as they appear. The reader is given even more scope to imagine it's parody when the Doctor says, "How wonderful to have seen that particular planet in colour at last." The Doctor can't be referring to Skaro here, because obviously he would have seen it in colour, even if TV viewers did not. Yet, if it's not Skaro he's talking about, then he's not watching Dr. Who and the Daleks. Thus, this can be read as a meta-fictional comment, which takes the piece closer to parody.
Notably, this is not the only story to suggest that the films exist as fiction within the Doctor Who universe, given that Nev Fountain's short story The Five O'Clock Shadow, in the anthology Short Trips: A Day in the Life, reveals that Dr. Who and his eight-year-old granddaughter Suzy are fictitious creations of the real Doctor to keep the nemesis named Shadow, the embodiment of grief and sorrow, distracted until the real Doctor can overcome his grief and escape from Shadow's prison. Shadow has no hold over the cheerful, angst-free Dr. Who, who departs with Suzy on further childlike and wondrous adventures.
The narration suggests that the Doctor is still in exile at this point, since it says that "his afternoons off were few and far between" and that his other option was to enjoy a bag of chips with Sergeant Benton.
The Doctor compares the "bizarre eye make-up" worn in the film to that employed by Jo Grant. This is similarly a reference to the Thals' appearance in Dr. Who and the Daleks.