These are some very basic facts about the series that should be kept in mind at all times. Since you should have already read the series (right? RIGHT!?), you can consider this as a quick reminder. :P
There are two faces to the story, the “chessboard” and the “meta world”. The “chessboard” is the real world, or rather as we later learn, an -interpretation- of the real world events at Rokkenjima based on the bottled messages written by Yasu/Beatrice and later the in-universe novels based on Hachijo Tohya’s (aka an amnesiac, unbalanced Battler’s) incomplete memories.
The “meta world” is, well, kind of complicated. It is a place filled with Yasu’s alternate personalities, imaginary friends and other magical beings, some of them imagined by the other “witches” or personifications of mystery rules and whatnot. Contrary of what’s shown, the two realms do not interact with each other directly and the “meta world” only exists in the fiction part of the story (though, even with all the torture and mind-rapes, it is still the more entertaining and lighthearted part of the story… go figure…).
Shannon=Kanon=”Beatrice”=Yasu: Yasu is the core character here. He/She is the son/daughter of Ushiromiya Kinzo from Beatrice the second (who herself is the illegitimate daughter of Kinzo and the original “witch”, Beatrice Castigloni). She/He suffers from disassociative personality disorder, possibly either because of her heavily incestuous origins, his/her damaged body or because of her treatment as she/he grew up. Shannon and Kanon are two of her alternate personalities, while Beatrice is the personality that was created for and by Battler and his promise. She is the main instigator of the murders, triggered by Battler’s return to the island.
Her gender is ambiguous, but I will treat her as female for the sake of simplicity and because most of her Personae are female.
The narrator is unreliable. No, let me stress that again: THE NARRATOR IS VERY, VERY UNRELIABLE!!!
Whenever something is not observed directly by the “chessboard” Battler (or whoever is the “detective” in that chapter), it is safe to assume that it simply did not happen, or happened in a way that is wildly different from what is told. In fact I have to go even further: Even if it was observed by them, if they are indisposed or the story is not told directly from their point of view, the narration is still completely unreliable.
There is no traditional “magic” on the “chessboard”. Period. However, as the story goes on, it clearly becomes harder to separate the chessboard from the meta-world as the story becomes more and more fictionalized and the narrator less and less reliable. If we are at that, technically none of the chessboard-stories actually happened, they are all just chaotic interpretations and fictionalizations of the events and the writing of Hachijo Tohya, who is actually Ushiromiya Battler, who survived Rokkenjima but suffered brain-damage and thus cannot identify with his memories and tries to reconcile with them this way.
Magic itself is liberally used to refer to lies, deception, sleight of hand or anything else that makes other people believe something that is untrue. So, for example, when Shannon tells George that their relationship exists because of Beatrice’s magic, it actually means that their relationship was built on a huge fat lie. The same is true for miracles and any other supernatural things in the story.
Kinzo is dead for about a year before the beginning of all the scenarios. His death is kept secret by the household to postpone the dividing the inheritance and cover Krauss’ embezzlement. The only times he -really- appears are in flashbacks, and in later Episodes even those are questionable.
The red truth is NOT the gospel, nor are the Ten Rules of Knox. They are actually used for misleading as many if not more often than to give clues thanks to the sneaky multiple interpretations of their meaning and the characters’ tendency to use the wrong questions and then getting “technical” truths that are actually true but are not relevant to the question or mask its true answer.
For example, saying that there are “No more than 17 humans exist on this island!!” twists the truth on two accounts: first off, humans =/= persons (or rather, persona’s), and the wording also hides the truth that there are actually 16 people (as in, persons with individual bodies) on the island, which is technically “no more than 17”, but is still misleading.