I felt that the ending was happy, overall. Reminds me very much of the ending of Code Geass and other similar anime endings.
Overall I didn't feel that the ending, or the game in general was well written, especially in respect to the overall pacing and structure of the narrative. The game is full of loose ends and plot holes that go ignored for the largest portion of the game, and it feels as though the writers thought they would just quickly answer as many of these as possible within its final hour, thereby granting this segment of the game a narrative payoff that ultimately isn't deserved or earned.
I think the narrative works because despite its lack of cohesion, between it all, they managed to write Kat as a very likeable character, so naturally one cares about her story, irrespective of how poorly its strewn together.
Overall I really enjoyed the game. It didn't need to be well written for me to have fun, and I'd happily describe the game as a flawed masterpiece. It's remarkable how much effort has gone into such a creative title, something we tend to see so little of. Of course, Gravity Rush 2 will probably sell poorly, reinforcing the notion that triple A developers should avoid risk and make more traditionally likeable titles that have already demonstrated popularity.
Basically, if we assume Kat took the deal, we have to assume that everything that happens after the scene where Kat blacks out and is shown lying on the ground is potentially no longer "objective reality" but the new reality where Kat gets to keep Hekseville and Jirga Para Lhao intact. There is some question as to WHEN Bit talks to Kat; that part of the story happens so quickly that I don't know if it's ever made clear when that conversation occurs. But if it happens after she defeats the beast/demon/whatever we're calling it, then it could be as much a fabrication as everything else. Even if Bit tells her before the defeat, the strategy Bit tells Kat could be true but her execution of that strategy could be a fantasy.
The only part where I think it falls apart is where the fabricated reality still involves her jumping into the abyss and disappearing for a year, because at best it means some of the demon's promises are false (namely all the bits about not remembering the demon or, as I think is implied, the destruction of Hekseville and the climactic battle). So the other option would be that fabricated reality doesn't start until she jumps into the abyss for some weird reason, but that doesn't really make a lot of sense to me either. And neither of these options answers the question of why the world seems to go on without Kat for a year when that doesn't seem to be part of the deal.
I think of this the same way I think of the Indoctrination Theory in Mass Effect 3: fun to consider the implications of, potentially true, but very likely not.
Personally I think it makes sense to follow the principles of Occam's razor here. The suggestion that Kat took the deal requires a large number of assumptions that we have little evidence for and would provide a less conclusive ending than the one we are presented. It does not make sense. People entertain it because they enjoy the ambiguity and mystery associated with that type of ending, yet I feel that it does not fit here.
I feel that scene was purely there to present Kat on what was essentially deaths door, it likely took place in first person not because it was directed at the player but because it enabled the developers to create a camera angle where Kat was looking up at the beast from the floor. It helped make her feel helpless, that there was nothing that was going to save her from this one. The writers used that scene to add significance to the scene where the people of Heskeville came together to give Kat strength, lifting her out of that perceptively hopeless scenario.
