I saw the end of the series a couple days ago and I've had time to chew it over, and I've come to some conclusions about what was going on. I have to add that this may not make a lick of sense to anyone; furthermore if you haven't seen the series you won't know what's going on in this explanation. Sorry about that.
The penultimate scene of the series occurs in something very like a TV broadcast control room, one with multiple screens and a lot of controls. Angel is sitting at the console, weeping as she watches the final moments of the story, and the shot cuts to show the book Metropolis, written by Angel Rosewater.
Then we see R. Dorothy Wayneright and Roger Smith standing behind her, saying something to her that we don't hear. Both of them are smiling.
Cut to the exact same scene we see at the beginning of the series, with Roger Smith's same introductory voiceover; we see him drive past R. Dorothy Wayneright and Angel on the sidewalk; end of series.
So, you may ask, "WTF just happened?"
Everything that we saw before that moment in the control room was essentially The Matrix crossed with The Truman Show, and it was all meant to be a dramatization of the book Angel Rosewater had written set in Paradigm City.
So what's real? I'm assuming that much of the starting point of the series is real: something happened 40 years ago to wipe out everyone's memories of who they were and what had happened to them, but not technical things like language and science and culture. Roger Smith is a Negotiator; R. Dorothy Wayneright is an android.
Angel Rosewater wrote a story set in that world, using people she knew as models for characters, and the novel was made into a movie via computer simulation: someone set up a simulacrum world with characters who had the right motivations and the right options to behave a certain way, resulting in them acting out the story. The rest was just a matter of having cameras at the right places and times.
So the whole thing about the Bigs (the mechs) was fictional, as was the thing about the Union and the "tomatoes" and so on. (Angel Rosewater is the daughter of Gordon Rosewater, the guy who built Paradigm City, and Alex Rosewater is Gordon's son--a real son, not a "tomato"--and Alex runs Paradigm Corporation...but is not a megalomaniac.)
That's why we see Big O and Big Venus cancel each other out after Big Venus has essentially deleted everything in the world; that's why Big Venus can manage that feat in the first place: it's all a simulacrum to begin with.
As the embodiment of Memory, the version of Angel in the novel has the ability essentially to cause everything to be forgotten, which is why all that is left are two parallel grids. Reality has been forgotten and there's nothing left but the foundation of the simulation.
That's why people had memories they couldn't possibly have: they were part of the programming of each character. That's why the fictional Roger Smith was an android; especially after he and Gordon Rosewater discovered the picture of themselves shaking hands when Gordon was much younger (and Roger looked the same as he does now) there had to be an explanation for it even if it didn't seem to make sense given the larger story.
The programming of the fictional characters brings up an interesting point, then. They're nothing but programs, but they themselves don't know it, and they believe they're making their own choices when in fact they're doing what Angel wants them to do. The interesting bit comes when you think of the Turing test: if you can have a conversation via a computer terminal and be unable to tell whether you're talking with a computer or human, the computer is sentient.
What about a sentient program which doesn't itself know it's a program? That goes beyond the Turing test. Does it have free will? By that point, you're in the realm of philosophy, and the question of sentience is meaningless.
So the entire series but for the last couple of scenes is essentially shot on a giant soundstage (albeit one that exists only in a computer) with actors who were designed from scratch to say their lines as written by Angel Rosewater.
One of the biggest problems with anime in general is the lack of denouement. Animators tell these huge stories with really complex and strange endings, and then give us seconds of "what happened after" before wrapping up and shutting down production. Big O is no exception to this; having been forewarned that the ending was like this, I paid extra attention to the details, which is why I've come to the conclusion I did.
There's another explanation, though: everything was real. As the embodiment of Memory, Angel restructured the entire universe to suit her desires. That included a clean and happy Paradigm City, one lit by the sun, one where she and Roger were together and R. Dorothy was their domestic robot, one where there were no Bigs and no Union and no byzantine plots by anyone, and where she herself was just an ordinary (though smokin' hawt) woman.
Without a better denouement I can't say for sure which is correct. The latter explanation is uncomfortable for me because that outcome wasn't foreshadowed the way my "everything's fiction" explanation was.
I can't explain it any better than that. When the show ended I thought, "Well, that made sense...but why did it make sense?" That's my problem: the ending fit and it didn't make me say, "WHAT ON GOD'S GREEN EARTH WAS THAT SHIT ABOUT?" the way some series endings have. If Big O had had a "WTFF?" ending I could just shrug and chalk it up to the typical way Japanese animators deal with tying up loose ends; they haven't quite figured out how to end epics yet. But this ending wasn't like that; it was sensical and proper.
I just don't know why, unless my explanation is correct.
* * *
"Angel is smokin' hawt":
The face isn't quite right, but let me assure you that the body is dead on.
* * *
What did I think of the ending? Even with my explanation, it's not very satisfying. It's like I said above: there's very little denouement in anime, and sometimes you have to make a lot of inferences to understand what the hell happened. But it's not always like that, which leads me to believe it's because sometimes the animators needed just a few more minutes of screen time than they had to completely tell the tale.
Some anime series provide denouement with still images run during the end theme; some continue the action with the theme playing in the background. Big O did none of that, which leads me to think that they told exactly the story they wanted in the time alloted without any compression or hedging.
Overall Big O is a good series. It's got great atmosphere and good characters. It's a shame they killed off Schwartzwald when they did; he should have been around longer. But he wasn't the primary villain of the series, worse luck.
Find it, watch it, and see if I'm wrong about any of this.