It's cool; I like to poke holes as much as the next person. I don't believe there are any here, but there's a lot that is left unexplained or only partly explained, to be sure.
The thing that was new after the shattering was the glyphbearers. That was something that helped keep them from being driven mad by the wind in the parts of the world where the wind was doing that. In the Valley 2 parts of the world, the wind doesn't have that effect; it's a big world, and it reformed in different ways throughout it. In other words, the planet started out something approximating Jupiter-sized to begin with, but after a 4D shattering it reformed MASSIVELY larger than that. So you get really big fluctuations throughout the world in terms of what one part is like versus another. Think of the first game as taking place kind of in Jupiter's red spot, if you will.
In terms of the Ilari themselves, note that they are never present in either game. In the first game you see Ilari stones, but those are just communication devices. Some of those became more prevalent after the shattering in terms of interacting with people more, but they were always there (mostly buried underground until some of them felt compelled to come out after the shattering. That's why mostly the positive ones are above ground, whereas the neutral ones are belowground).
The Deep is indeed a corrupted medieval town, and it just happens to be what you see a lot of in both games. However, the Swamp is also medieval, so you're getting some of the non-corrupted medieval parts, too. As to why you don't see a wider slice of each time period, that's easy: budget and scope. It's not like the Time of Magic was all forests or ocean shallows either, and the Pre-Industrial time period was predominantly elegant Elizabethan cities -- but all you really see of that is some backwoods areas.
So in other words, the history is broad, and each time period is broad. You're seeing tiny slices of each, not because we didn't have story for the rest of it, but because there's only so much one can do even with a budget as large as the Valley games' were.
The Deep is kind of hinted as being related to the underworld, although it's not really specified where the Dark Ilari come from. Elder is definitely from the underworld, however, and he's got nothing to do with the Dark Ilari. I'm not sure how much of his story you've encountered from Valley 2; most of that comes right at the very end of the game.
Oh, another note: it's been hinted that the Ilari are basically the source of all magic in the world. Everyone in this world has always been able to do magic since the dawn of time, but the Ilari are reputedly behind that. Ergo, the Ilari are also something that has been around since the dawn of time in this world.
