They get into that earlier in the episode.
When Shinra Kouketsu reverts all the uniforms, it's controlling all the life fibers. But Ryuuko and Senketsu are still able to act, because they are "neither life fiber nor human." They're a mix of both working together.
So in the end, Ryuuko
doesn't instantly destroy all the life fibers. She asks for all the absorbing to stop, for clothing to be clothing and people to be people. So everyone is released, and without the power of Shinra Kouketsu or the Original Fiber, the fibers all pretty much burn up and die on re-entry. It doesn't affect those who are between fiber and human, like Ryuuko or Ragyo. It's similar, but it's not a plothole.
As for Nui,
she was absorbed into Shinra Kouketsu, and Senketsu absorbed that, and then Senketsu flared out from absorbing too much power, so she's done. Not satisfying enough for me, but what can you do.
I liked the ending. I guess a fundamental shift in the way action was choreographed was too much to ask, but they did a good job of upping the stakes, giving everyone something to do, and closing out Ryuuko's character arc. I still like the show a lot, despite its flaws. Style is substance, and this show has style in spades.
