HOW do you obtain the New Ending? Under what circumstances?
After moonlight parade? Before? As an alternate to it?
I guess that it still happens in 1000 AD, that's for sure. So...
1) Normal Lavos Defeat
2) The whole party goes to Time's Eclipse. They find Dalton here? Was it before?
3) They find Future Magus who says that's the future where "we've" defeated Magus. Apparently he's referring to "we" as "us" with the party, but
4) Future Magus later says that he doesn't know if they're from the same dimension, basically.
5) Future Magus says that the Dream Devourer feeds from memories, dreams, etc.
6) Schala reveals, in a very dramatic moment, that her own feelings of sadness and wanting to erase everything (she did had a pretty shitty life) were what was causing the Dream Devourer to consume everything.
7) Magus tries to convince her out, but Schala knows he won't be able to help her just with power, or words. It does seem like she's under Lavos' parastic influence (wants to consume stuff), but she still has some control.
Schala uses her Dream Devourer power to devour Magus' memories and dreams, so he could start anew and quite possibly have another chance to help her. Magus does NOT commit mental suicide, his lines don't say "lol I'll reset myself" or "lol I was pwned bye memories", he's still as dramatic as his "if my destiny is to die, I must simply laugh" or "so be it", accepting what was coming to him as a challenge.
9) Schala also erases the party's memory from these events, or the party just was never there and it was a plot device ending to show Magus' and the Devourer's story. It doesn't make sense just have Magus get that threat, and have the rest of the party told "k no prob you guys can just go away".