I really enjoyed this episode. What I particularly liked about it (besides it getting me to pull down that collection from my shelf & read this story in it, which I hadn't yet) was the insight it gave me into the intellectual background you seem to have. You had come across, of course, as knowledgeable about Christian thought, but then one could hardly be a scholar of Augustine and not be, and it hadn't ever seemed as personal—to both of you—as it did here.
As an example of what you meant, when talking about free will you both went instantly to theology. As someone who is more grounded in analytic philosophy, my immediate go-to would not be Calvin, but the libertarian (not in a political sense), compatabilist and determinist schools of thought. I don't mean either is more important than the others; I just mean that for a basic explanation that would be my initial framework. So in that sense, it was great to get a sense of where you both are coming from. (I, too, was powerfully affected by Christopher Browning's Ordinary Men, by the by.)
(Incidentally, you have both been reticent about saying, outright, what faith traditions you belong to. If you are both being private about an area that doesn't need to be spelled out for the podcast, then I certainly would not want to pry. But if you simply haven't thought anyone would be interested, well, at least one listener is. After all, Gene Wolfe's Catholicism is central to so much of his fiction (and Swanwick grew up Catholic and left the church; I heard him discuss this at a panel once, and he definitely seemed to think it relevant to his work). So it would be interesting to know to what degree either or both or neither of you share it (either now, or growing up, or what have you) — if, again, you wished to. All I'm saying is, if you wanted to say, I, at least, would be eager to hear.)
As for the Swanwick story: the one connection I was surprised neither of you made was to the Wizard of Oz. It's hard to have a walking, talking Scarecrow in English-language literature and not think of that, and it seems clear to me that Swanwick was playing with the parallels, at least a bit. The young boy certainly seems like a Dorothy-like figure: without parents, thrown into chaos by a crash, trying to get home, or at least escape the wicked witches. One could see the former Young Master as the Wicked Witch of the West... or as Oz, who originally seems good, but is a fraud and not to be taken seriously. And an old car is not a bad analogue for a tin man, is it? And so forth. I don't know how much to make of this, but it seems worth mentioning.
One last intertextual note: not directly relevant to the story, but my favorite SF example of the sort of "getting-out-of-programming-by-reinterpreting-it" is in Greg Egan's novel QUARANTINE. If you've not read it, it's a lot of fun (not as literary as Wolfe, but enjoyable, and that one moment is worth the whole book).