>Why isn't Manaphy Water/Psychic?
Because Uxie, Mesprit, and Azelf fulfill the "psychic cute" trend for that generation threefold
>Why is Lucario part Steel?
Conceptually, Lucario is based in part on medieval knights, and has a "will of steel" (I personally find this a load of shit). In its physical design their are two metal spikes on its hands.
>Wouldn't it make more sense for Rayquaza to be pure Flying? (or Flying as its primary type)
It's based on stats and the Physical/Special divide in RSE. Groudon is a physical attacker, Kyogre a special attacker; their STAB corresponds to this. Rayquaza is designed as a mixed attacker, and thus GameFreak gave it a physical type (Flying) and a special type (Dragon) in order to let its STAB take advantage of this.
>Why does Unown exist?
Many gimmicky Pokemon exist; sadly, its gimmick is incredibly difficult to salvage, and many fellow GSC Pokemon are equally gimmicky and remain vastly underpowered.
>What's the deal with Heatran?
According to the games, Heatran is the personification of volcanic activity and represents the Earth's molten core. It does not appear to have any mythological basis, as most other Legendary Pokemon do.
I hope this was helpful.