So, with the revelation of our character's legacy, a lot of the Dark Knight storyline is finally starting to make more sense. As we know, the Dark Knight job is about opening the soul up to Darkness - to what we know now is the energy of creation, of growth, and of activity. It is also associated with negativity and pain, but that almost seems to be an Eorzean contrivance rather than something that is inherent to darkness itself. Regardless, when we first seek out a mentor for the Dark Knight quests, we find a corpse in the Brume, a Steel Greatsword, and a Soul Crystal. Dismayed, we pick up the Soul Crystal, only to find that the corpse wasn't a corpse, but indeed still a living, breathing person - Fray Myste.
If you've completed the Dark Knight storyline, you know what comes next. Fray teaches us, becomes our mentor, and then attempts to subsume our life, to become us in a very real way, because she is us. She is the very embodiment of our soul's desires. Hell, she even is a Conjurer - someone who can HEAL - despite being a Dark Knight mentor. Why? So that you can learn how to be a Dark Knight without having to worry about being harmed while doing so.
Sidurgu does say that he's heard of things happening like this before, so it's not unheard of. But it was always a little mysterious - and while Fray may just be a figment of our imaginations, as others below have said, could there be another explanation? I might have an idea:Come now, you knew Fray was dead from the beginning, but you didn't care! You had a sword and a soul crystal. But what you wanted was a mentor. A mentor with the gifts and the knowledge. A dark knight who could guide you on the path─who you could aspire to become.
Fray, Myste, and their various powers and abilities? They're simply the nascent abilities of the Warrior of Light's Ascian soul given form by the connection to dark energy that the Dark Knight soul stone provides. Simply by desiring a mentor, the half-complete Ascian soul that we possess, amplified by the power of dozens of Dark Knights before us, gave us the power to conjure those memories into a Dark Knight mentor that could act where we knew we could not. We are using creation magicks without even thinking about it. While our inexperience with creation magicks allowed our creation to nearly run amok and turn against us, our willpower eventually allowed us to reign it in.
The same holds true with Myste. The further we delved into the darkness, the more our regrets and our pain took hold in our heart. The more we wanted to make amends. And the Soul Crystal provided an opportunity, though the strain of creating so many simulacra through Myste caused it to shatter for a time.
We are not just "a dark knight" in this universe. We are an (incomplete) Ascian Dark Knight. That gives us abilities that most Dark Knights cannot even think about - I don't think most Dark Knights could pull off Living Shadow, for instance. While this can make our abilities more potent, it also makes us quite dangerous - our raw and untamed tapping of the darkness in our hearts means that our ability to use creation magicks is also raw and untamed. Once I started putting the pieces together, this makes me think that this particular bit of Warrior of Light lore has been in the cards for a long, long time.