I don't exactly know what's going on inside the director's head, but I think it's possible that this trainwreck is going as planned. Some stroke of genius might still save this anime. Something along the lines of "All superheroes and supervillains in fiction are actually real. Samurai Flamenco is supposed to become the leader of all fictional heroes. Beyond Flamenco is actually the leader of all fictional villains. They're supposed to keep the war a secret and not let any citizen know, but something caused these heroes and villains to have amnesia and so they no longer fought in secret."
Or not. Anyway, SamFlam wild guessing thread.