Schauder-type Estimates and Log-Critical Well-posedness for the Two-Phase Muskat Problem with Surface Tension

We prove short-time well-posedness for the Muskat problem with surface tension in the full two-phase setting, allowing different viscosities, arbitrary density contrast, and rigid boundaries. In particular, no Rayleigh--Taylor sign condition on the density contrast is imposed. The interface is assumed to be a graph, uniformly separated from the fixed boundaries, and the initial data may be large in the log-critical class $\dot C^{1,\log^\varkappa}\cap H^1$, with $\varkappa>1$. Thus the result reaches the natural Lipschitz threshold up to a logarithmic correction. The main difficulty is that, in the presence of viscosity jump and boundaries, the interface equation is not given by a closed explicit contour dynamics law. Instead, the normal velocity is recovered through an elliptic transmission problem in moving domains, and the resulting evolution is a genuinely nonlocal quasilinear equation. We derive sharp Schauder-type estimates, adapted to the log-critical scale, for the transmission operators generated by the bulk Darcy flow. These estimates identify the third-order parabolic mechanism produced by surface tension and control the nonlinear coupling between the interface geometry and the elliptic transmission structure. The proof builds on the Schauder framework developed in Part~I of this series \cite{CHN1}, but requires a new analysis of the Muskat transmission problem in moving domains. Combining this elliptic theory with the contour formulation and time-weighted H\"older estimates, we obtain existence, uniqueness, smoothing, and stability for large interfaces in arbitrary dimension.