That was a pretty entertaining review, Hoagiebot! I really like Production Person #1, though I doubt anyone on the production team is actually sensitive about what bloggers and forum-dwellers say, since I'm sure somepony somewhere tears apart every episode as if they're ruining the series.
As far as retconning goes, I would be okay with it if Shining Armor only effectively existed for this one episode. I prefer to think of Twilight Sparkle as an only child and I don't mind the reality being a little different for one episode; there's a long tradition after all, that movies made of TV shows exist in different continuities; and this episode was certainly something like a movie. Unfortunately such reasoning also allows the other two-parters to be in different continuities, which would explain why there has been little effort to conform to the prehistory given in the season premier.
I really liked your analysis of villainy too. I think Queen Chrysalis (where do we even know her name from? I can't find it in the episode) really was kind of overpowered; besides shapeshifting, love absorption, and apparently magic beam powers, she also had mind control abilities, which she was able to use on at least Armor himself plus her three bridesmaids. It seems like she could have just mind-controlled Twilight and there would have been no problem. And her overconfidence at the end... but anyway my point is that I agree power balance is an important and interesting issue.
It's like trying to find a way to have a villain stand up to the all-powerful Old Testament Hebrew God and somehow survive-- just ask the Ancient Egyptians of the Exodus story about how well that worked out for them!
Well that's a pretty good example of how to maintain some dramatic tension without de-powering the all-powerful being (like they did to Celestia). Have the all-powerful being follow a long plan so that the suspense comes from finding out how it's going to work; essentially, we would want there to be an enemy Celestia does not want to "incinerat into his/her component molecules". Or some limitation on what Celestia's willing to do could be revealed. Celestia is obviously reserved about magic anyway; she doesn't teleport around like Twilight and in fact rarely even flies.
Actually I'm willing to question the idea that Celestia is even very powerful, magically speaking. I mean, she does theoretically have control over the sun, but that really doesn't have to mean that she can lift other objects of the same size. And I wouldn't jump to the conclusion that she has all the same powers as Nightmare Moon either. Nightmare Moon had basically joined the "dark side of the Force" as far as magic goes; it's a common theme that evil magic can be more powerful (though I don't have a handy tvtropes link, "the dark side" and "black magic" not mentioning it explicitly).
Which goes back to this interesting question of overpowered heroes and/or overpowered villains. To me it's a question of preferred worldview. If you think evil is 1) very powerful and 2) of very clear-cut negative ambitions but 3) inevitably stupid, you'll have no problem with villains like Discord and Queen Chrysalis, who come on the scene with all the tools to win but end up losing from overconfidence. And you'll have no trouble writing this sort of villain if you think your audience should be warned that with great power comes great overconfidence, and modesty and goodwill to your fellow pony will keep your head clear and win the day. I tend to prefer villains who at least lose through a more realistic but equally stereotypical fault, having idiotic minions; because one of the chief disadvantages evil faces is getting along with people, so the quality of the average minion willing to go along with evil plans is bound to be low. But there are some good arguments that someone trying to take over all Equestria rather than slowly infiltrating the villages is probably pretty overconfident.
But number (1) is the one I intended to discuss, not (3). See, I happen to think evil is not inevitably physically stronger than good. However, even the weakest of evils can destroy
something valuable. The whole world doesn't have to be at risk in every epic storyline; the characters just have to be genuinely invested in preserving whatever is at stake. This, of course, is how some of the other adventure-oriented episodes of FiM have proceeded; in Dragonshy, the only real threat was a dark cloud over Ponyville, and in Dragon Quest the conflict was over Spike's view of his identity. So in my view, the way to make a credible villain in the face of an all-powerful Celestia assisted by an also overpowered crew of ponies wielding the Elements of Harmony is to do a little less than threaten all of Equestria. An equally epic quest could follow from a villain mysteriously kidnapping somepony or eating all Celestia's cake.
I'd better stop trying to brainstorm potential plots though, it leads to a lot of staring at my keyboard.
As for the argument about love magic... "nopony can force two ponies to be together" is certainly predominantly a statement of what's advisable, not what's possible. Given the show's repeatedly loose treatment of continuity, I'd say there's not much point in analyzing whether love magic is supposed to be possible. Besides this, we don't know much about what kinds of spells unicorns tend to have since we haven't seen very many unicorns' special spells. I would say that since Cadance's love ability wasn't specifically shown to be as central and important as presiding over day and night is, it wasn't intended to be on the same level. The main point of Twilight's line about the uniqueness of the ability was to show that Twilight really likes Cadance and the wedding was a good thing after all.
I don't think it was the strength of Cadance's love spell which allowed Shining Armor to defeat the changelings. The love spell broke the mind control, but Cadance's non-magical love strengthened Shining Armor. (No love is really non-magical in a world where Friendship is Magicâ„¢.)