Recently there have been further discussion of the pocket dimension theory in the Compendium's nightly AIM chat sessions. Given this, and that the diagram was misplaced, here is a recap of the theory with some new developments.
Lavos Pocket Dimension Theoryhttp://www.chronocompendium.com/images/Articles/lavosdimension1.gifLavos displays some strange behavior. If the travelers defeat the shell and warp into the past, the shell is still defeated. A strange blue aura surrounds Lavos during the Ocean Palace disaster and the final battle. Lavos Core is able to open time warps to different eras. Lavos also appears to have knowledge of the future; during the final battle it emulate the fighting techniques of Guardian, which exists in 2300 AD. A possible explanation is that Lavos exists within a pocket dimension or "time bubble" which transcends time.
When Lavos arrived on earth in 65 million BC, it created a pocket dimension separate from normal space time. A wormhole connects the pocket dimension to every time period.
An observation made by chronotriggerfreak is that the wormhole connecting the pocket dimension to space-time would be governed by the same axiom governing Gates, namely: "Determining the Destination of Time Travel via Epoch and Time Gates". Because of this, the rate of time must be the same in the pocket dimension as the outside world.
Lavos' time axis would be perpendicular to the normal flow of time. Lavos ages within the pocket dimension at a normal rate, but it appears to be the same from any given time period. For example, if Lavos had existed within the pocket dimension for six million years, it would appear to be six million years old from every time period.
Anything done to Lavos from one time period, such as defeating the core, would be visible from all other time periods as well. Therefore, if the shell is defeated, Lavos appears to have no shell from each time period.
Lavos is not actually physically present within the earth. The wormhole aperture is located at the earth's core, giving Lavos access to the planet's energy and lifeforms. During the Day of Lavos or the Ocean Palace disaster, the wormhole ascends to the surface, causing a dimensional disturbance. The wormhole offers an uninterrupted view of the pocket dimension, creating the illusion of Lavos' presence.
If one approaches Lavos, and passes through the wormhole, the interior of the pocket dimension has appearance of the blue aura which surrounds Lavos. During the Ocean Palace Disaster, Queen Zeal, Magus and the others warp into the pocket dimension. During the final battle, Crono battles Lavos in the pocket dimension.
Lavos core is able to open time warps to different times, because it is connected to those eras through the wormhole. The aperture of the wormhole gives a distorted view of the time period being accessed. Lavos is also able to survey the entire timeline and would have knowledge of, for example, Guardian's fighting style.
After Lavos dies, the pocket dimension no longer connects to space-time, but the past Lavos exists on a separate timeline.
As before, the only problem with the Pocket Dimension is that Lavos shell is always intact during the Ocean Palace disaster.
Nature of Lavos' Space FlightAnother topic which was discussed was the nature of Lavos' space flight. During the short glimpse we are given of Lavos traveling through space on approach to earth in 65 million BC, Lavos demonstrated the capacity for powered maneuvering in space. Rather than collide with the earth in a hyperbolic trajectory, Lavos performs a braking maneuver in low earth orbit and slowly descends into the atmosphere. Lavos' self propulsion may be related to its magical power and manipulation of the Shadow element.