No sooner is Kuro’s mysterious cousin retroactively introduced as his “one true love” is the frail yet hauntingly beautiful Rikka revealed to be not only a fellow mermaid/kudan flesh-eater like Kurou (explaining why she’s his type), but the very mastermind behind the Steel Lady Nanase monster of imagination. Karin’s older sister was a red herring, while Karin herself was only a loose template upon which Rikka crafted a powerful urban legend.
Surprisingly—and yet not—Kotoko knew this all along, but coyly kept it from any part of the audience who didn’t suspect Rikka as soon as she was mentioned, not to mention from Saki. Kurou also knew it, which is the main reason he arrived to take the Steel Lady on (not exclusively because Kotoko summoned him).
As for how she knew, Kotoko recognized Rikka’s style in the illustration of Steel Lady Nanase that adorns the website, and which is key to creating a strong and consistent image grafted to existing rumors about the idol Karin’s ghost.
Once a goblin cat informs her that the Steel Lady has reappeared, Kotoko, Kurou, and Saki head to her location. There, Kurou will fight her, all night and dying several times in the process if necessary, as Kotoko works her logically fictitious magic in the car. Kotoko remarks that she’d rather not see her boyfriend die over and over, but this is the best way to keep Nanase from hurting anyone else.
As for why Rikka is doing this, Kotoko believes it’s so she can refine and expand her inherited kudan abilities. As Kurou mentioned, reading the future is an imperfect art, but Rikka is attempting to make her ability as perfect as possible, and is apparently obsessed enough in that venture to overlook the occasional murder.
Kotoko closes the episode with a wonderful analogy, likening her impending duel with Rikka as the start of a committee to discuss a proposed bill in parliament. It’s a deliciously wonky yet apt analogy. Rikka has a powerful, seemingly insurmountable majority with her captivating Steel Lady story and its accompanying imagery.
But here’s where things differ from government: among the “voters”—the tens of thousands who visit the site and contribute to the forums—there are no coalitions, nor alliances. Not only that, the masses aren’t explicitly aware they’re voting for anything; they’re simply going to believe the most compelling story. If Kotoko can convince them Steel Lady Nanase isn’t real, she can steel the votes and the majority, and sap her of her power.