是的，填 were happening 和 had happened 都是虚拟语气，但用法不同：用 were happening 表示当时正在发生的情况，用 had happened 表示针对当时来说属已经发生的情况。对于你的句子来说，很显然 were happening 更符合句子语境，指“吵闹”的情况当时“正在发生”。句意：

Noisy as it was, he went on reading as if nothing were happening. 虽然很吵，但他仍继续看书，好像什么事都没发生一样。（指当时本来很“吵闹”，但对他来说，好像当时“吵闹”的事没有正在发生）