If it was Ultimecia, not Rinoa, then how did Ultimecia know that Griver exists in the mind of Squall?
Ultimecia could compress and absorb space and time itself and create GF's out of thin air. As such, it is hardly a stretch to say that she was able to in some way scan Squall's mind and find the image of Griever.

In the game, when Rinoa was possessed, she went absolutely mad in the space station = insanity.
So if Rinoa is Ulimecia, she will become insane and creates Griever because she acknowledged Griever from Squall in the first place.
If Rinoa was mad only when possessed, and Rinoa IS Ultimecia, then that can't explain Rinoa becoming a mad Ultimecia because that would imply she was possessing herself in real time, which is absurd.

There are a lot of evidences that Squall has careless attitudes against his friends, including Rinoa. Yet, as the story goes on, Rinoa always became on Squall's side, caring about him, loving him, etc. Does that sound odd?
Not really. It's called being in love.

It's plausible that TC has been done before the FF8 game, it's also plausible that what we see in FF8 is a compressed world.
Not possible. The game clearly states that no one but Ultimecia could live in a time compressed world, so if someone else compressed time there's no way we could be playing the game we see. The very fact that we can play the game proves that TC never happened and never will happen in the entire history of the FF8 universe.