What strikes me most about this pair of (as always excellent) episodes was the sheer lack of clarity on the most basic events of the text. The basic status of every person and group in the story is up for grabs; Glenn and Brandon came to extraordinarily different interpretations despite hours of careful, joint close reading of the text. Obviously VRT grounds it somewhat (although I'll wait until I get to those episodes — and reread that story! — to get into that). But I wonder if here Wolfe hasn't pressed his ambiguity too far. Probably not: probably we just need to be better readers. But it's on the borderline, I think.
I disagree with the conclusion both G & B came to at the end, that the story is wholly an invention of Marsch. But argument for it is not primarily inter-textual but extra-textual, namely, it doesn't seem to make sense for the novel as a whole. If Marsch were the main character of both parts 1 & 3, then having a story that did nothing but cast light on his mental state might make sense. But he's a minor character in 1. And it seems like the book as a whole is very much about the two-planet system, and the abos. To have this just be his fanfiction for Fifth Head robs it of its meaning in that. Although, of course, attributing it to Marsch does make everything in it questionable. (Again, the ambiguity is almost too much!)
So here's one approach. Let's assume that the story is based on Marsch's researches, and think what in it is most likely to be reliable. What in it is the sort of thing an anthropologist could reconstruct of now-vanished cultures (which didn't leave a written record) a hundred years after? Well, it seems to me that the things that are most likely to be Marsch's inventions are all the specifics — the specific characters, the incidents and the incidentals. But presumably the broad strokes are better grounded: the cultural divide in the abos between (at least) two groups, marshmen and hillmen; the presence of two different waves of human colonization, one of which becomes the shadow children and the other of which is shown landing at the end of the story. The mental abilities in this reading might be actually-recoverable beliefs, but not necessarily what in fact happened. Although does the plant that they chew survive? Because if so, it would ground them more.
I'm not sure where to go with this interpretive approach, but it strikes me as at least a plausible way to sort out the contradictory clues and hints: by what in it is most likely to be true, based on its authorial ascription. — But we'll see when we all get to VRT (or, rather, when I catch up to you on it!)
A few specifics:
• I think I had a slightly different reading of "extension" than you do. You seem to be reading extension as something that matter has; Brandon talked about edges, and the edges of tables and so forth. I read extension as, essentially, spatiality, that is, the existence in three dimensions, so that clouds and lava and water have it, but dreams and thoughts don't. Descartes said that bodies have the attribute of extension, but I am reading the notion of extension as broader, as the fact existing in space, of the space-ness of things — and of vacuum. (Thus Brandon says at one point that clouds don't really have extension the way physical things do, whereas I would say they clearly do; they don't have substance, perhaps, but they clearly have extension — unlike, again, thoughts.) On this reading, shadow children shake the very essence of spatiality. (The plain reading of the passage seems to be that they shake vacuum. But that doesn't seem to work, because their songs work in the atmosphere of St. Anne's, where there is no vacuum.)
• FWIW, I checked the book, and the word "substance" occurs precisely twice in the entire book. Once in the first novella ("The din of the barking was incredible, a solid substance that shook us as we descended the ladder"), and once in the second ("he tapped Sandwalker’s hard, flat belly, or at least made the gesture of doing so, though his finger had no substance") — interestingly in both cases things which don't have substance in the classical sense: in the first case it's a metaphor for the loudness of the sound, and in the second it's denying something that has substance.
• Brandon defines (in the first of the two wrap-ups) substance dualism in a way that makes it sound more or less equivalent to Platonism — inherent forms and so forth. Is this necessarily true? I would have said that platonism is one form of substance dualism, but that there are others (e.g. Descartes), where there is matter and mind, two different substances, but without the latter necessarily forming or patterning the former.
• You make a lot of the sentence which reads: "When we came some of you looked like every beast, and some were of fantastic forms inspired by the clouds—or by lava flows, or water." But you don't dwell on the word "inspired". It feels significant to me. First, it's not that the abos were imitating clouds, lava or water, the way they were imitating animals, but were making new shapes with the inspiration given by the other shapes. This means, to me, that they weren't literally gaseous or liquid; that they could still have been clear animal forms, just in shapes which mock clouds (a nice role-reversal, by the way). It makes them a little less 'any particle', and a little more like animals. (Like Glenn, I take the idea that abos are animals as a serious & important point here.) Secondly, I would have said that, unlike imitation (which all sorts of animals do in the real world) that taking inspiration requires sentience — implying the abos did have sentience before the arrival of humans. (And that's even before the etymology of inspiration as deriving from the word spirit.)
• You make (powerfully, I think) the Eden metaphor, and you talk about the question of sexual reproduction (or not) of the abos, but unless I am mistaken you didn't bring them together. Perhaps the arrival of people (snakes! The devilish shadow children!) shifted the abos from reproducing asexually to sexually: and that that is why they still don't quite understand how reproduction works (not connecting it with sex, being confused about trees (but also seeing phalluses as trees)), etc. They have been thrown out of the garden, but not entirely: not by God, but by shadows. They are now reproducing sexually, but don't yet have knowledge of it. — Maybe.
Ultimately I remain baffled by this novella, in the way I don't feel by most of Wolfe's work, where I find it simply very difficult. But your run of episodes on it switched me from being somewhat frustratedly baffled to being delightedly so, which was a huge gift, for me.