I was about to agree with everyone on how Squall lives except that one point that The Ceej mentions, that in the home video Squall is absent. That is so true it's creepy. He's practically their leader in defeating Ultimecia, so why should they exclude him? But maybe I'm just being paranoid.
However, theres a lot of evidence that shows that Squall is still alive, already pointed out in this thread.
Man, it's times like these I wish I could just kidnap the plot designers of FFVIII and interrogate them.
Does anyone notice Rinoa's dog Angelo running towards her general direction during the last home video scene? Just a thought since no one mentioned it. If you want to see it, click
here.
(Skip to 2:40)
So pretty much, there are two ways to take the final movie. Either it's all a happy ending, and Squall was wrong the whole time cause he's a loner loser, and he somehow survives the time compression madness.
The other way is that he dies horribly in a compressed world. Rinoa eventually goes crazy or some thing and hangs out in the balcony, then 'imagines' Squall is alive and kisses a ghost. That could maybe explain why she was doing that little finger thing in the home video to nothing. Or maybe it was just blocked by that stupid wall, who knows?
Or a third way is that when she was looking up in the stars, that tiny shooting star she saw, she wished that Squall was alive and, Lookie! He's standing right next to you! (Kidding. That would be a terrible FF ending...)