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I think it's neither time travel or imagination machine. Gamefreak just threw a bunch of shit together without a solid plan, even they wouldn't have an answer.
We'll never have a definitive answer or closure for all the questions, they are just gonna move on to the next generation. Then one day there'll be an interview with Masuda asking about it and he'll say, "Well you know, making a game is hard haha. A lot of the lines we put in the game were just meant to sound mysterious (laughs)."
Interviewer: "So was it time travel or an imagination machine"
Masuda: "I don't know (laughs)"
