The 10-year-old was the odds-on favourite for the Ryanair Hurdle but was pulled up with two to jump after dropping away tamely, leaving connections mystified.
Mullins and his team conducted a series of tests and report the 2015 Champion Hurdle hero in good form.
The County Carlow trainer said: “We are as happy as can be expected with him. All his tests have come back fine.
“The next step up is to do a little bit of fast work this week and if he passes that test we will be aiming at the BHP Insurance Irish Champion Hurdle.
“We have been minding him and last week we gave him a slow canter. We’ll move up a gear this week.”
Faugheen could be joined in the race by stablemate Melon at Leopardstown on February 3, though the latter was not put through his paces on Monday morning.
“He was unable to work because he lost a shoe and the blacksmith wasn’t here to put a shoe back on,” said Mullins.
“He’s fine and I’d like to run him in the BHP as well.”
Douvan is back in light training but Mullins believes it is too early to say whether the star two-mile chaser will run this season.
The Rich Ricci-owned eight-year-old has not been seen since he sustained a pelvic injury when suffering a shock defeat in the Queen Mother Champion Chase at Cheltenham last March.
He had been set to reappear in the Tingle Creek Chase at Sandown in December but was not declared, with Mullins reporting he had not been totally happy with the horse in the days before the race.
He subsequently ruled him out for the entire campaign, but Mullins said: “He’s back cantering and we are doing that for a few weeks to see how he progresses. We will take things slowly.
“I don’t know and I don’t want to say what the chances are of him running this season. There was an injury there and whether that was an old injury or not he hurt himself for a few days.
“What surprised us all was his recovery, how quick it was, and then our veterinary team started looking at him from another angle and were thinking that there was a little chance (of him running again this season).”
Yorkhill was disappointing in the Leopardstown Christmas Chase – his first try for Mullins over three miles – and is now set to drop back down in trip for the Coral Dublin Chase on February 3.
A return to hurdling for the two-time Cheltenham Festival winner has not been ruled out, either. Mullins said: “We will go down the two-mile chase route and if that doesn’t work we will go back to hurdling.
“I’m happy for him to go for the Coral Dublin Chase, and I don’t think there is much alternative.”
Min, who crossed the line first in a Grade One over Christmas but was demoted by the stewards, is another contender for the Dublin Chase.
“He’s in great shape and came out of his race over Christmas at Leopardstown well,” said Mullins.
Djakadam put in a rare dull display in the Leopardstown Chase and will be joined by at least one stablemate in the Irish Gold Cup on February 4.
Mullins said: “I was very disappointed with him at Christmas and it was probably the worst run of his career.
“Nothing has shown up, maybe it was too close to the John Durkan. We are looking forward to running him in the Unibet Irish Gold Cup along with Killultagh Vic.
“Total Recall is entered for the Irish Gold Cup but I’m not sure if he will be aimed at the Grand National or go the Graded chase route. I’ll have to speak with the owners and see what they would like to do.”
Mullins said Footpad was firmly on course for the Frank Ward Solicitors Arkle Novice Chase, in which impressive Naas winner Demi Sang might also run.
Al Boum Photo is the main Mullins contender for the Flogas Novice Chase, but no decision has been made over whether Vroum Vroum Mag will run again.
Her trainer said: “She is in training but we still haven’t decided if we are going to cover her or race her for the rest of the season.”