I just found this thread and wanted to bump it after completing the game today.
EDIT: Obviously SPOILERS FOR THE ENDING; don't read any of this if you're just late in the game.
I liked the ending "twist", and am thinking of going through a New Game+ to see if the story and the various explanations they threw at you hold together. First thing I noticed - the opening narration by Alvis describing the rise of Bionis and Mechonis is carefully worded not to contradict the history you learn of later. E.g., because it sounds like a "beginning of the world" story, I'd assumed at first that life didn't spring up until AFTER the two titans died and finished fighting, but the narration doesn't say that - it just doesn't mention there were already Machina, Giants, Homs and High Entia living on the two titans when the fight began.
I guess the big questions from the game are: what exactly is the "Monado" and what does it represent? Who is Zanza? And who is Shulk, and why is he able to create a "third" Monado? I just wanted to put down what I got from the game and hear what other people had to say or took away from it. Sorry this is long, but the game throws a lot at you in the end.
Monado
From what I understood, the "Monado" (roughly) is the ability or property of realizing potential, of steering the world through its infinite possibilities to transform the unrealized into the real and change destiny. The characters in this world understand it as the ability to direct "ether", the energy and endless possibility of life, to make their will a reality.
In a more literal sense, the Monado is the Alvis computer program, designed by Klaus and Meyneth, to transform unrealized matter in some way, and compute through matter's unrealized possibilities (i.e. "see the future")? (someone in the OT mentioned "Monado" comes from "Monad", which is not only a philosophical / Gnostic concept - oh, Takahashi - but also a concept in physics?) And whoever directs the program essentially has control of that ability to transform matter and unrealized potential and can make their will a reality.
This property of using will to change reality, of directing Alvis and controlling ether, takes physical form in this world as a sword, also called a "Monado", which both Zanza and Meyneth have. Since Alvis the character wears a key on his neck, maybe each sword can be thought of as a "key" to the system?
Zanza
Zanza was originally a human scientist named Klaus on our Earth, who was working on some sort of physics experiment to "create a universe" using Alvis (I got a real CERN / Hadron Collider vibe from the imagery they used). After the accidental destruction of the existing universe, Klaus and Meyneth were apparently the only beings left, except only their "souls" or "wills" were intact. They directed the Alvis program to create worlds in their own likenesses (Meyneth being of a more technical inclination?) and inhabited bodies to take corporeal form, while also controlling the Bionis and Mechonis. They created the races of Homs, Giants, High Entia, Machina, Nopon, etc. so they wouldn't be lonely, and were for all intents and purposes "gods", since they had administrative privileges over Alvis.
Klaus feared his death and annihilation into eventual nothingness, so when he realized the beings of Bionis would eventually move on and forget him, leaving him truly "alone", he decided to have cycles of destruction and recreation, with the High Entia / Telethia as his agents of destruction, so that he would always be in control of destiny and life on Bionis. Meyneth accepted that her creations would eventually move on from her with a will of their own.
Zanza attacked Meyneth and Mechonis because... he couldn't accept another God with beings and life that would move on without him? (forgot some of this part). When he is weakened by the fight, his creations, the High Entia, imprison his possessed corporeal body (a Giant, formerly friends with Egil) and his "soul" is trapped with the "Monado" sword / key in the ruins at Valak. Zanza accepts this because he has a vision that he will be released through Shulk, and directs Dickson to prepare for it.
Shulk
Shulk is a random Homs boy who accompanies his parents on their expedition to the ruins in the Valak Mountains where the Monado sword, and Zanza's soul, are kept. Zanza's soul sucks the life energy from everyone in the room, including Shulk, and inhabits Shulk's body. There is no special reason for choosing Shulk, except he was there and Zanza saw it in a vision.
Shulk's will and personality are developed independently of Zanza. But also, it seems by virtue of being Zanza's host, he develops additional abilities and powers beyond what Zanza intended or realized. When Zanza is released, Shulk continues to live because he has developed his own "Monado" within. Not because he was born special, but because fate made him Zanza's host, and because of the strength of his own will.
This seemed to be a running theme - a creation or student developing independent will, thought and abilities beyond those given by a creator or taught by a master. So Shulk can eventually overcome Dickson, and can develop his own Monado and will apart from Zanza, the same way the High Entia can decide to escape their fate as Telethia, or Homs can develop independent thought and defy "God" and destiny.
Shulk essentially gains administrative privileges, his own "key", to the Alvis program, but his final direction is apparently one to let the beings that are created to determine for themselves the world they'll live in. I.e. let life and creation develop independently through evolution and chaos, without any "God" or administrator controlling things.
So, that's what I got - Takahashi plots are always open to interpretation, though. But I felt I could make rough sense of this one, and it didn't involve multiple organizations, acronyms, and too convoluted of a backstory. I would be interested in seeing the game's planning documents and concepts (similar to a Xenogears "Perfect Works"), though. Really enoyed the game; best RPG I've played in years.