Is the treatment of Milarepa by his guru, Marpa, a true recounting, and if so, how did these strenuous labors over many years fruitlessly building stone structures significantly reduce his karma?

This was a seeming make-work exercise and more like punishment than restitution. But indeed, that is the main goal of punishment always when implemented by a sane and logical overseer or government institution. The depraved societies of extraterrestrials use punishment simply as a way to enjoy themselves. But humans do view punishment as a form of restitution, and that is the essence of what is achieved through karma when someone re-experiences a difficulty in an attempt to heal it with the second go-round, or who may find themselves on the receiving end of much grief that parallels what they cause to another person in a prior incarnation, and now must face the music. While the construction of stonework like this seems to have little to do with the real‑world events described as the karmic debt here, they nonetheless can represent a useful learning and restoration exercise by requiring a kind of ongoing sacrifice and penance to be doing manual labor of a menial sort over many hours, many days, weeks, and months, and have the patience to accept this requirement in order to satisfy the mentor and exhibit what is needed to make a satisfactory accounting in the attempt to meet the standards and criteria set out as needed. This was indeed a significant and meaningful obligation he was expected to deliver and did so. This was effective in rebalancing much of his karma. There is no fine print in the Law of Karma mandating that it must be an exact parallel to a transgression in the repayment. It is only a sufficient energy with the gaining of an appropriate higher awareness, which after all, is the goal of the Law of Karma to begin with, and that is what cancels the obligation. If the person achieves a higher vibrational state in the course of their rebalancing and repayment, this will negate the need to go further as the higher energetic existence will subsume the leftover negative energies and cancel them, in effect, and this is the way in which the karma is terminated as a further obligation.