First things first, I'm blowed away by the amount of thought and effort you put into this. Kudos. I thought of gathering all the notes from the Dark Descent just as you did with Machine for Pigs, but never got round to it.
Btw, you should totally play the first one. It's much better a game, more scary, and it doesn't tell the story so... unclearly.
Speaking of which, I think Chinese Room did a lot of mistakes. I didn't really comprehend the story (thanks to you, I do now) - I had all the puzzle pieces but couldn't really piece them together. And I think a game (or any piece of art) shouldn't be written in a such a way that the receiver has to spend hours and multiple replays/rereads to understand anything. Still, awesome experience. I say experience, not game, because there's almost no interactivity available. Beautiful and extremely well crafted maps, even though the game is pretty much a one long corridor. Awesome sound and music production.
Sorry for the unncecesseary review, I just couldn't hold myself ;P
Speaking of your theories and others.
I'm pretty sure that the Machine was powered by nuclear reactors - Mandus even had to manually lower some of the fuel rods when he was sabotaging the Machine. The radiation might also explain hallucinations towards the end of game.
But then the Orb could power it as well - it's never clearly stated what it can do.
From what I understood, twins' hearts were needed in some way for Machine to work. But I played the game a long time ago and I might have misinterpreted that.
-EDIT- As I remember, hearts were mentioned a lot. And I even found this excerpt from your collection:
I also don't understand (or remember) why exactly Mundus went to rip his heart out in the end, besides the clear need to kill himself.