That's the most interesting thing about FFTA. No one is really sure what the writer was thinking when he created it. When you think of the other FF's (at least the ones i've played) the ending is clear as the concept is well explained. FFTA leaves so much to debate that a college lvl english class could debate until the end of time. I believe that FFTA2 will explain these things. Yes the concept can be understood well enough to not take away from the expiernece.

I like the idea that the Grimoire is a magical artifact that has guardians associated with it (Le-Grim, LLendar). These effects take effect to create a world that manifests your dreams, nightmares, and thoughts. The problem with this giving mewt the sovereignty you would expect is that it takes it at a sub-conscience level. Mewt could not stop the Crusader Marche from dispelling him from this world. If you want to explain why you can keep on playing you can say that the seams that were ripped seperated the dream world from the real one leaving the only real character mewt to return to the real world. Yes this doesn't explain the diaapearing people but heck they were ripped from their world to go and spiral away until the dream world stabled. I haven't played the last missions so I can't comment I guess so watever.