PSO - PSU - PSO2

[blace]

So they basically created an alternate timeline?

More or less. You never encounter anyone from Pioneer 2 although a CG scene does show Ash, Kireek, Sue and Rupika in it.

[ZER0 DX]

So they basically created an alternate timeline?

Not so much making an alternate timeline as it was nullifying the "bad ends" of PSO from ever happening.

I'd imagine most of the major events and quest lines of PSO still ended up taking place, but Falz just never gained Rico as a host and therefore nothing bad happened to her. Same with Flowen since you defeat Olga Flow before he's completely taken over by it and end up saving his life in the process. They never elaborated on if Dark Falz even managed to get revived at all on Ragol since Rico was no longer taken over as a host. Chances are it either never did, or it was so laughably weak without a host that it was defeated easily. Flowen still had to have been experimented on with the D-cells however, otherwise that fight would never have happened in Infinity.

Falz not existing makes it impossible for Episode 3 to have even happened though, so if Infinity nullified the existence of Dark Falz appearing on Ragol, Sega essentially rendered the plot of that game non-existent. Also in that regard, they nullified all of PSU's Falz plot as well since the Falz in that game has memories of Ragol (most likely projected by the Profound Darkness, it's very unlikely it's the same Falz). If Ragol Falz never existed, PSU Falz would have no memory of it either and none of the subspace Ragol areas would have been able to exist.