Okay...that opening scene was bad enough on its own. But think about what must be going on there now — the United States just lost its president, never mind MILLIONS AND MILLIONS of civilians, and goodness knows who else. And just who would even consider launching a nuclear weapon at the United States, never mind think to kill the president? Several real-world nations come to mind: someone in the Middle East, Russia, North Korea, or perhaps China would have the means and/or motive. And who's to say the enemy's real plans have even come to fruition? That attack may have been nothing more than a demonstration of the power they wield. What's going to happen to the U.S., let alone other nations now? Either they're going to be drawn into a terrible nuclear war, in which millions more, perhaps billions, will be lost, or the entire world's nations will be forced to surrender to a tyrannical power who could annihilate them at the press of a button.
The scene and dialogue before the city got nuked made the implications much worse. The bridge looks like the Brooklyn Bridge and a mention of a summit might imply a special meeting at the game's version of the UN. Not only would millions die, diplomats and possibly other heads of state died in the attack as well. It will cause chaos around the world as people would demand answers and ignite old grudges into war.
Luckily, it is implied in the end cutscene that that was a Bad Future alternate timeline that was avoided somehow because of Roland's experiences in the other world. We see the same scene play out again, but this time there are celebratory fireworks instead of nukes over the city.
Fridge Brilliance within the horror: The first game establishes that the two worlds are connected, and the game implies that Roland went back in time (since he was younger in the Other World), so by helping bring about peace in the Other World, he changed his world so that it also was peaceful when he returned to his own world and his own time.
The Tale of A Timeless Tome DLC keeps mentioning the borders. So its someone close to the United States. Since Canada and Mexico arent hostile towards the US, the enemy boils down to Cuba. This probably means that unlike our timeline, in the alternate timeline Roland is from, the Cuban Missile Crisis was never resolved and the Cold War persisted into the present, until Roland made his journey into the other world.
So um, Roland never mentions his wife so she is either dead or at least doesn't sound like he is close with her anymore if they are divorced. If Roland's son is still alive in the other world after the nuke hit, the poor boy might as well been a orphan as Roland is stuck in the Ni no Kuni World and no talk of his mother could mean she isn't around anymore.
It was implied that Hydropolis would be destroyed if the amount of people in the kingdom changed, as that would affect the spell keeping them safe, and that was part of the reason for all the weird rules. But after Evan befriends them and Queen Nerea decides to break the spell and marry Leander...nothing happens. Leander leaves, you recruit a bunch of Hydropolitans to Evermore, and the kingdom's still there. I could understand if they had shown all the people escaping the kingdom before it gets destroyed and rebuilding it, but it seems like the whole "time loop" plot was just... completely negated for some reason. What happened? The whole thing feels like an Aborted Arc.
In the post game, Nerea mentions that she casts Rejuvenate once a year. So depending on where they are in the cycle, they could have almost a year until the volcano goes. The real question is why they don't use that time to evacuate.
Nerea and Leander's dialogue during The Reveal seems to imply that (1) they weren't 100% sure Hydropolis would be destroyed, and (2) even if it is destroyed, it won't happen the instant the rules are broken. Essentially, Nerea seems to have decided that, as long as there was a constant risk of losing Hydropolis to that volcano again, she would keep it in the loop. Rather than... oh, say, evacuating her people and establishing a new kingdom somewhere else. While the writing is clumsy, the story does fit into one of the game's themes, which is letting go of the past. There is also an obvious Gameplay and Story Segregation component in play, a.k.a. sidequests. Making Hydropolis or its citizens unavailable once the main quest for the city is done would be... inconvenient.
Just occurred to me that maybe the volcano had a 50/50 chance of erupting with each loop reset, and they just got lucky that with this reset, the volcano isn't going to erupt? And because they couldn't take any chances or didn't factor this in, they made the spell loop regardless of whether the volcano erupted?
The volcano erupts every time, but it hasn't erupted yet for this loop because they have time between casting the spell and the volcano erupting.
She basically said "to hell with that, at least there'll be some love in the kingdom again". They couldn't evacuate and rebuild at another site because prior to game events there was a long period of constant wars and chaos, according to intro. But now, thanks to Evan and his treaty, they can actually move (notice: she immediately jumps on the opportunity), and there's is an evacuation effort already in the making: through sidequests you whisk away nearly half the population by yourself, and that's only the ones you personally witness.
After the second DLC it looks like she decided to Face Death with Dignity - glimpses of future tell that Hydropolis is gone with all it's inhabitants. On the flip side tho, it seems that the Hydropolis citizens were given the option to seek refuge in Evermore before the eruption given Queen Nerea's dialog in the DLC. The dialog even implies that she either will willingly join the evacuation group to Evermore and abandon Hydropolis, or trust Leander to evacuate Hydropolis with their offsprings in tow, when the day arrives- if it means their offsprings will have a future.