Ok, I've replayed the entire episode and i'm planning on translating the series to dutch with the help of Kyle so that's why i've stumbled upon this and i'll be digging out anything possible... this is all about the story told by rhue about rhuke and lyla!!!
here we go, like lyrra says:LYRRA: Remember Rhue, it's always
a good idea to introduce the hook
of your story early on.

let's start with the meal. whatever option you choose something twisted happens (this is a compilation of many possible answers!!):
MOM: Heh...\| How do you feel...\| Rhuke?
RHUKE: Fine.\| Perfectly fine\..\..\..\|
...you conniving killer! Your food sucks,\| "Mom".\|
And guess what? I took precautions to protect me against your little food poisoning. I know all about your little scheme to bump me off.
MOM: I don't know what you're talking about.
RHUKE: Oh,\| I think you do.Hah! \| I know all about Dad!\| What ever happened to good ol' Dad? Just vanish with the wind did he?\| I think not. You disgust me,\| "Mom"! \| You're not even my real mother!
MOM: You fool!\| It took you this long to figure it all out? Today you will die!

My theory on this is either it's rhue's mom and that explains a bit why we never got to see his parents beyond the talk about their son working to get the pendant. His mom was psycho and tried to kill rhue and his dad for reasons unknown. Rhuke in the story attacks his own mother. Now where did we hear something about somebody's mom being killed?
Weird to think that traz and rhue would have the same mother i admit that. so i don't think it's possible. What else could this be? If this story were based on real happenings from his past, it might be Rhue evesdropping on events happening in a neighbouring tent (possible other members of his fist) and learing on how serena's mom offed the little child. Rhue jumped in and fled along with her and tried to protect her from her mother... the other wolves (see the story of rhue's past) then being slade and chasta... which is also very doubtfull but still more possible. (i count slade and chasta in the story as there were three wolves and I think it means something, it also might be totally other people...) Question unanswerd: why then are the other children dead too?
final possibility on my theory that i can think off: this is a clouded memory of serena herself- her mom killed her and blamed chasta for it - and is mixed into rhue's weird subconscious.
Are rhue's parents dead due to the landorin massacre too? Who would leave his parents without looking back to them? How long has he been wandering without leaving a trace of his wellbeing to his parents?
Enough on this topic let's continue... The fight with the shadowy monster...
For starters if you think about this then its quite obvious that it might be linked to the phantom slasher!

rhuke arrives in a forbidden patch as the name of the map says.
he runs up to the shadowy beast in front of lyla. the patch he's on looks like a roman 1 or a big I and the shadow stands in a cross with a tree in the middle.. I don't know what to make of this, maybe its nothing... but some of you may discover some hidden meaning (bible ...

) behind this.
MONSTER: Mwahahah!\|I have locked Lyla's ability
to love others away in this ancient artifact.

(This artifact is undoubtly the necklace that cetsa is wearing, the one rhue worked for to by for serena. It is undoubtly the proof that this story is about serena... And as it is rhue that's taking over the story again we can be sure that he knew about the necklace long before he saw it on cetsa's neck. What bothers me is that he only tells the story of serena falling into the river AFTER he picked up the unknown floating necklace at the very start of Ep1
and tossed it into the river... again as DSoK pointed out this is an event that is not obliged to be done and can easily been looked over...)
MONSTER: Mwahahah!\|I have locked Lyla's ability
to love others away in this ancient artifact.
RHUKE: Why?
MONSTER: I don't answer questions.\| Only by defeating me
can you save your one true love.
RHUKE: Well there's no way that's going to happen.\|\| You're much bigger than I am.
LYLA: No Rhuke, you can do it!\| The power is inside you!\|You were born with it Rhuke!
RHUKE: Are you saying that I'm some sort of "Chosen one"?
LYLA: Yes!
RHUKE: How do you know that?
MONSTER: Be quiet! You are a dead little boy!
Rhuke then says: I don't think so and kills the shadow with great floods of blood splashing all over the patch and then Lyla wonders if rhuke wanted to say something. He replies with:"You're standing in a puddle of blood."

How twistedly hilarious this might seem at first, something of a drama is playing here. Rhue is obviously something chosen.. But the question is as to what he's chosen for? Is it to both wield the illuminati and dark swords? To destroy something evil? is it to defy the purpose and prove that there's nothing out there? to break the wandering and find the rolling mists? or is it to see that the way is just a spiral? (which is maybe hinted at near the end of episode 5).
The 'you are one dead boy' and 'standing in a pool of blood' might signify the death of both rhue or serena. Thing is that rhue doesn't know how he got up after the wolves attacked him (according to his own story...) Maybe he died and relived with the aura of something else in him... (already in the theories of many others on this board)
The question why serena knows that he's a chosen one is diffifcult too. Because in his version of the past she asks him what he's doing that they already killed the others... So she doubted his abillities? Is this a merged memory of somebody else saying this or his inner feeling?
Then there's the case of killing the shadow to free his loved one.
quite obvious this one means that once rhue finds out the real truth behind the PS he might discover what happend to his loved one : serena.
Rhuke doubted his might because the shadow is much larger then him... MIght hint at the many souls living inside rhue... And how its difficult to deal with them when he tries to find himself back. Then there's the ability to love locked away: i think its just a metaphor for saying that the memory to the girl is connected to the necklace.
Then there are three other things i want to ask about:
The three wanderers rhue stays with at the opening of the game:
it was a man and his wife and another unknown girl. Why did they got killed all three? I assumed it was their daughter. If the PS is gauis who would kill the non believers of the purpose (said in some ppl's theories) then the PS might have spared her... And who was she (she's -her event-
called lexus > said this before and i still think its something important because it's still unchanged in the latest versions)...?
second thing : Why is Dirk in the final credits of episode 1?
What's he doing there and where's he heading to, did he just meet up with gauis (who appears the screen after that)? I still think the credits have some meaning (look for the threads in this forum on the ppl in the credits in episode 5 which hints at certain things)
Third thing: I asked it before and i say it again: why is big rhue looking for jeruh and lyrra and only find's lyrra crying after the landorin massacre (scene plays after rhue was pushed into the pits by strata)...
BTW : ruhke is first called percillus.. This might be farfetched but the name is as weird as alan's...
That's all folks... Try to elaborate on this as you all see fit... I'll post something shorter next time

Ken~ says: I'll be a cop by then...
~Alundra~ says:All right, grand tour of china! drivin' around in a cop car!
Ken~says:You'll be wearing the uniform too?
~Alundra~ says:no u'll wear the uniform
~Alundra~ says:i'll just be sitting next to you going woeh woeh woeh ¨-^