Here's what i got from the ending. squall and the others were sen tinto time compression. squall, being the more reserved of the bunch, was seperated from the others. he witnesses Edae recieving her powers and faints or something. He then dreams the whole part where he is walking, and it turns out that ultimecia's attempt at time compression failed, since she was so weak, and they came back into the real world where her castle would be. right in the field where Squall and Rinoa made their promise. that is where rinoa found him, and they live happily ever after,
(well, unless you consider fanfictions and the rumored FFVIII-2 lol) BTW, i support the Q=U Theory

i explain all this in my fanfic too. it is called "And..."