Full disclosure: I have only read book 1 of the Kingkiller Chronicles so far, although book 2 is physically on my tbr shelf. I have also not read the first novella set in that world, nor do I subscribe to the author’s fan sites/newsletters/Patreon/etc; I only follow a couple of (free) social media accounts.
The Narrow Road Between Desires is a revision/extension of a previously published short story, per the author’s note as well as some commentary on the book’s Goodreads page; I might have peeked at the reviews after posting my own rating; there’s seems to have been some history I was unaware of IRL.
This story follows a side-character from the frame story of the main series, Bast. In the main series, Bast is apparently a student/sidekick/bound-to-Kvothe-somehow Fae, whose only job (in book 1 at least) is to worry about his master and be vaguely threatening to anyone who might pose harm to his master. Here, he actually gets personality, and a good deal of interaction with the world outside of the inn where he lives.
In a lot of ways, the story is based on well-established folklore of the “fairy/fey bargain” variety, with a major twist: it is not the hero/heroine teen-adult main character facing temptation though; it’s the village kids. Bast has rules for them when they come to bargain with him for things like lies to get them out of trouble or otherwise get what they want, including never tell any adults about goes on by a certain dead tree. In return, Bast usually asks for favors, secrets, or items he wants that he can’t or won’t or doesn’t want to bother getting himself. For example, when Kostrel wants information about the Fae, being a curious and smart kid, he bargains the secret of where Emberlee (the third (?) prettiest girl in town) bathes; there’s a pretty hilarious twist concerning the implications of this bargain later on. The main plot though has Bast working with Rike, a kid he doesn’t especially like for some pretty serious real reasons for both of them. The whole book takes place over roughly one day, and by the end, Bast gets home to the inn and realizes he forgot something he was supposed to get for his master.
This whole thing initially struck me as a cozy while still true to lore in general approach to the whole fairy bargain trope; then I read the long-ish author’s note, in which Rothfuss credits one of his kids for asking for a revised fairy tale, and this story was sort of a response to that. So basically, that initial impression was right, but Rothfuss both explains and names the revision to the usual “never make a fairy bargain because that never ends well” idea.