Everything that happens after episode 8 is a vivid, increasingly deranged hallucination created by Akane's frail mind as she silently sits in the corner of her solitary confinement room in the First District's mental ward. Everything. The continued Orphan attacks, Artemis, the Searrs invasion, the Obsidian Lord, and the HiME festival are an all attempt on Akane's part to give meaning to Kazu-kun's death.
The reason why episode 9 is the beach vacation fanservice episode is because Akane is imagining her classmates being as vulnerable as she was in the previous episode. This is symbolized through the girls spending the entire episode wearing skimpy bathing suits and not much else.
When the HiME festival starts, each character represents a different part of Akane's now-fractured psyche. Mikoto, Shiho, and Nao are manifestations of Akane's rage and jealously toward the other Fuuka Academy students still having loved ones to call their own. Shizuru is Akane's unbridled lust resulting from the happy sex life she was denied when Kazu-kun was killed. Natsuki is her self-doubt and fear of being defeated again. Fumi is her unconditional, caring devotion to Kazu-kun. Mai, Midori, Yukino and Akira are Akane's final moral restraints toward killing others. Yukariko initially falls under this category, too, but she slowly changes as Kazu-kun (Ishigami) reminds her to avenge his death.
btw, the reason why Yukariko and Ishigami are older than any other pairing in the show, Yukariko is pregnant, and Yukariko commits suicide is because these characters represent a future Akane can never have with Kazu-kun, and Akane's mind slowly realizes this.
Like in the movie Identity
, Akane's separate personas battle each other to determine who deserves Kazu-kun the most. As they systematically kill eachother to no avail (i.e. nothing changes the fact Kazuya is dead and never coming back), Akane begins to realize that she's too weak to save Kazu-kun even in her own fantasy, so order has to be restored by the one entity that started her suffering: Miyu.
When the fighting is stopped, Akane's wounded mind does the only thing it still has the semblance to do: Imagine things as they were at the beginning of episode 8, and simply pretend Kazu-kun never died in the first place. Hence, Mai Hime's final episode.
Now imagining herself in Kazu-kun's arms, Akane lets go of the final thin threads of reality she was still clinging to. In the real world, a crazed but peaceful smile appears on her face.
It's Only The Fairy Tale She Believes.