Quote Originally Posted by Roogle View Post
Ellone and Squall are not related by blood in any way, shape, or form. I think that there may be some confusing occurring from the fact that Ellone was raised by Raine; however, Ellone was only a foster child of Raine because her parents were killed when she was a child for refusing to give their child up to the government.

Laguna arranged for Ellone to be taken back to Raine after the events of the flashback in Esthar; soon after, Raine gave birth to Squall and passed away, and, subsequently, Ellone and the newborn Squall were sent to the orphanage.
Fixed.

Roogle's got it right. As for whether or not Laguna knew Squall was his son, the conversation in the Ragnarok implies he does. I'm not sure if he knew all Squall's life that he had a son or if Ellone told him after she left the White SeeD ship, though. That is never specified in game.