The usual warnings apply: These notes are intended for people who have already watched the Air television series. If you read them without having watched the series they will give away the ending and generally spoil things for you.
Misuzu is, of course the reincarnation of Kanna, and thus the “girl in the sky” that Yukito is looking for.
Yukito is Ryuya’s descendent and also, probably, his reincarnation. The best evidence for reincarnation is that Yukito receives a scar that matches the wound that killed Ryuya. Also the dying Ryuya promised to find Kanna.
The fact that Misuzu reaches her “goal” indicates that she is now free of the curse and will no longer be condemned to sad dreams. However if she is reborn she will still be fated to die young, because a human body cannot contain the spirit of a winged person.
In the final sequence the little girl and little boyl on the beach are Misuzu/Kanna and Yukito/Ryuya. We are either seeing their reincarnations or their spirits. In the former case we would have to assume that reincarnations can overlap in time, but we’ve pretty much established that though the example of Yukito/Sora. In any case Yukito will stay with Misuzu forever so she won’t be alone.
Of course if they are reborn together and Misuzu is fated to die young, then Yukito must also die young. That’s the price he must pay to keep his promise. A Buddhist viewer might assume that once they accumulate enough karma points they will be reborn in the Pure Land and will thus be guaranteed happiness.
This works out to a rather melancholy happy ending. Misuzu and Yukito will be happy, but the Winged People, like the dinosaurs, are extinct. Nothing will bring them back and the world is poorer for their loss.
It isn’t obvious from the subtitle translation, but if you listen to the Japanese dialog it is pretty clear that Misuzu has regained her memories when she wakes up the morning after receiving the toy dinosaur. She goes back to addressing Haruko as okaa-san and her speech in general is more mature.
The pattern seems to be that Misuzu almost dies twice, but makes a partial recovery after Yukito gives her the puppet and after Haruko gives her the dinosaur. Both times her spirit is fully restored, but not her body.
Kano is plagued by guilt over the death of her mother, but her real problem began when she touched Kanna’s feather, preserved in the shrine for 1000 years. The feather shares in Kanna’s curse and will tend to bring sorrow to anyone who touches it. It causes Kano to be possessed by the spirit of Shiraho, the woman who first found the feather. Shiraho’s grief and rage cause Kano to want to kill herself.
Yukito is able to cure her, probably because he is the one who has the power to lift Kanna’s curse.
It is suggested that Kano is the reincarnation of Yakumo (Shiraho’s daughter) and that Kano’s mother was the reincarnation of Shiraho. Note that Yakumo’s birthmark appears temporarily on Kano’s wrist, and the encounter between Kano and her mother ends with Shiraho’s lullaby for Yakumo.
In this case the connection with Kanna is that Michiru borrowed one of Kanna’s feathers so that she could use its magic to appear on Earth and comfort Minagi.
Michiru is a “fragment of a dream,” but whose dream is she? Not one of Kanna’s dreams, since she doesn’t bring sadness. The answer is fairly obvious: she is Minagi’s dream of having a little sister.