I understand the theory of multiple universe timelines all too well. I already know the various ways of reconciling paradox.
Rinoa + Ultimecia + Adel's power were *temporarily* placed into the young Adel by Ellone. It was the standard 'junctioning' that Ellone had done all along, making young Adel all that more powerful. Thus, we don't really need to care about it in a power timeline, because it's only temporary.
What you're describing is classic 'multiple universes' theory. Why? Because of the way you deal with Ultimecia; once Squall returns after the final battle, you say the future is undefined, and that Ultimecia is never 'born'. But she had to have come from somewhere... this is where you get Another Future, and start straying close to the theories Chrono Cross/Chrono Trigger use.
I think that's far too complex a method, personally, when it's a lot easier to fit it all into one timeline and one sequence of events.
Just for the record, I'll give you Ultimecia's timeline, from the game:
Ultimecia is born in the far future. We don't know what kind of person she is, but we assume she is malicious, or grew up that way.
She later inherits the power of a Sorceress, and starts on her descension into tyranny. Or maybe SeeD had records of her from the past, and decided to nip this problem in the bud, forcing her to fight back... we don't know.
What we do know is that she learns of the secret of Time Compression, where she would be able to meld several presents into one and absorb all the Sorceress power in the world, becoming the most powerful being ever (equal to the Great Hyne). She also discovers the Ellone Machine.
Ultimecia uses the Ellone Machine to go back and take control of a young woman named Edea. The time she takes control is uncertain... but definitely before the start of the game itself.
Insert the entirety of FF8 here; when Edea is defeated, Ultimecia junctions onto Rinoa instead. After Adel is released, Ultimecia is about to try to junction onto Adel, but Laguna's plan is put into motion, and Rinoa absorbs Adel's powers, then awaits Ultimecia's next attempt to enter her. As soon as that happens, Ellone uses *her* power to transfer Rinoa+Ultimecia into young Adel, and them shifts Rinoa straight back into her own body, leaving Ultimecia there. Ultimecia begins Time Compression.
Squall and co enter Time Compression and travel to the *FUTURE*. They are now where Ultimecia's body is. They enter the castle, defeat Ultimecia (and enter Time Compression again during that battle), and defeat her.
When Squall tries to return home, his memories lock onto his desire to find Ellone, and, yes, he goes too far. Ultimecia does follow. Ultimecia ends up giving her power to Edea, and Squall unwittingly gives the idea of SeeD to Edea as well.
Ultimecia dies.
There. No inconsistencies, it's understandable, and it doesn't breach the 'can't change the past' rule Ellone preaches to use in Disc 3. It also sets up the present and the future.
If you're still saying that 'fate dies', then what you're really saying is that the universe Squall returns to is *NOT* his universe. Or the universe Ultimecia goes back to to try and take over is not *her* universe. Both of which lead to more complex explanations and freak occurences. I have no doubt you could likely explain them... but not as simply or as elegantly.
Nature abhors a paradox. We know this. That's *why* there are several ways of dealing with it. You seem to think I subscribe to that 'common theory'. I don't. Let me tell you the theories I do subscribe too...
1) Past cannot be changed, but future *can* be changed.
In this theory, time travel is not possible. This is the world I believe we live in. There's still the 'free will' aspect here, but the future is not predetermined, unless you think that humans are all automonous beings who are just act how their brains tell them too, with chaos theory only making the events and decisions *seem* random.
2) Past cannot be changed, future cannot be changed.
Under this, time travel *is* possible. FF8's story and consistancy makes more sense under this theory, simply because a lot of what happens is set up for what Squall and others do. (This includes stuff like helping out Laguna: "The fairies are back again") This is one of the most elegant ways of explaining time travel (the puzzle is already fitted together), but it's not as 'fun' to work with; a lot of people like time travel to see what they could *change*. FF8, however, isn't about change, as you notice ^_^ It's about living the present.
3) Past can be changed, Future can be changed.
This is the final theory, usually. However, it's here that you start hitting extremely complex theories, involving multiple universes all along a probability axis. It's under this theory that you can have effects without a seeming cause (the cause having come from a different vector on the probability axis). It's also extremely complex and ugly, frankly.
The biggest flaw to your theory, in my opinion, is one of elegance. Why Squall? What makes him special? Why does his influence count more than Ultimecia's? Why does fate have to die?
The other thing you seem to have missed is that the theory I've proposed still makes sense, and still gives a happy ending. So what if Ultimecia will still be born in the future? It's already been dealt with; the danger has passed. And that wasn't the point of FF8 at all. The point of FF8 was Squall's own growth. For me, Squall's smile at the end is probably the most telling aspect that it was a happy ending after all.