At the end, there is a scene portraying Fran riding on Palontras, the luckdragon-like physician from the Second Reality, as Itward flies beside her in his ship. All fine, right? Well, consider the fact that throughout the entire game, the picture used to depict Fran speaking is a brain. Then also consider that one of the villains mentioned wanting to remove her brain from her body a few minutes before the ending. One conclusion players can reach is that Fran is now no more than a disembodied brain, and that the entire game has been a recounting of the story by that brain before its expiration. Supporting this idea is the fact that the last we saw Palontras he was horrifically wounded and Itward, last scene, was in a crash that caused a massive explosion. The king may have been just lying to Fran that Palontras would be fine so she wouldn't waste time mourning him, thus the happy ending is Fran's own wishful thinking.
Something else in support of this: at the very start of the game, Fran is instinctively afraid of the gun she finds - a gun that appears again at the very end...
Dr. Oswald appears to be particularly fascinated with experimenting on twins. Fran's mother and her Aunt Grace are twins, as well as the ill-fated Clara and Mia. In the case of Clara and Mia, they were sewn together and died shortly after. This game takes place smack in the midst of the worst of World War II. Who else at that time period was performing gruesome experiments on twins (and human beings in general)? Either Dr. Oswald is a fan of Mengele's work, or perhaps he's even a part of the Nazi ranks...
At the beginning of the third chapter when Fran is transformed into a tree her clothes are scattered around. Specifically her dress, shoes and stockings ... wait, isn't something missing? Where are her undergarments? Was she wearing any? If yes, did they get transformed along with her? If yes, why not the other clothes?
Fran's been reunited with Mr. Midnight and Itward, she's going back to Ithersta, Dr. Oswald and Grace are no longer in the picture for her...that's all well and good in and of itself. Doesn't this game have a much more serious Greater-Scope Villain, though? Remor, the Prince of Darkness, the Terrible Black, the leader of the Kamalas, is still very much alive and, as an Emotion Eater parasite, he's bound to Fran just as much as a tapeworm living inside of someone's body. Not only does that mean that Fran's life isn't going to meaningfully improve until he's gone (just imagine having something like that living in your head; she's essentially the food source for an Eldritch Abomination), it also means that he's got a first class ticket to Ithersta riding on Palontras' back. He's apparently capable of manipulating and/or outright possessing Fran in order to get her to do his bidding, at least in certain situations. He seems to use that wherever it will be as traumatizing as possible for her. It remains to be seen what direction a possible sequel will take with this, but it's difficult to picture how that's going to end well for anyone involved.
Every shot you see of Fran's parents, they've been violently killed - dismembered even - including the news article that talks about their deaths. But in Act 4, when you help to dig up their graves, their corpses look awfully whole.
To be fair, mortuary work could have sewn them back up—their bodies weren't unsalvagable, just torn apart. That said, though it depends on how long ago the murder took place, the bodies seem to have deteriorated much too quickly to have been embalmed properly.
While it seems like a significant part of the more surreal plot elements almost certainly did happen, particularly given that many of them make an appearance in Little Misfortune, it's important to keep in mind that we're seeing the events of the game from the perspective of a ten year old who's the psychological plaything of a bonafideEldritch Abomination that feeds off of emotional distress. It's entirely possible that her memories of her parents' deaths have been altered to be more horrific, especially given that she seems to have been under Remor's control at the time. If she killed them while possessed, which is unfortunately probably not just a lie (Remor would get a lot more out of actually forcing her to do it, and from what we see of his abilities, he's very strongly embedded in her mind), it's much more plausible they were just stabbed, since she would have been physically incapable of mutilating their bodies to that degree.
