Lunar/WMG

The Blue Star is a post-apocalyptic future earth
The Blue Star and the Silver Star are obviously a planet and its moon, and they apparently have the same size, color and relationship as our own planet and moon. The second game showed that the Blue Star (Earth) has been turned into an icy wasteland (nuclear winter?) by the battle between Althena and Zophar, and most of the humans there were turned into monsters (mutated by radiation); the remaining humans were brought to the Silver Star (the Moon) which Althena made fit for habitation.
 * In some parts of Lunar Silver Star Story Complete, you can make out Earth landmasses from beneath the clouds. This troper has seen Africa and Scandinavia.
 * Why so much magic in the future? Easy. Much of the magic in the games seems to resemble Magitek, especially the inner workings of Vane, the Goddess Tower, and the temple-like place on the Blue Star where Lucia was kept.
 * What about the goddess? It was said that the magic was granted to humans by Althena, and it seems easy for someone like Lucia to take it away; this suggests that humans have some sort of nanotechnology in their bodies, planted by their 'goddess', and Althena and Lucia are actually humans heavily modified by the Magitek to have a remote control over the rest of the technology.
 * Lucia was alive and a modified at the time of the war, but doesn't remember it because she was an infant at the time, modified so she would age to full maturity, and then live in her prime for eternity. She is there to help the humans move back when the nuclear winter ends.
 * And the dark god? Zophar is likewise modified, to the point that he's lost almost all traces of humanity. He used this technology to keep Ghaleon alive on the brink of death for the past thousand years.
 * But why all the Magitek, and no other technology? While Magitek was important in setting up a colony on the moon and saving the remaining human race, much of Earth's remaining technology was left behind on Earth if it wasn't destroyed in the war. This is why there are some astoundingly advanced things run on 'magic' (Vane, the guns of the Grindery, the Goddess Tower), but the rest of the world is stuck in the middle ages.
 * And the dragons? That is what some of our housecats will become, once selective breeding and mad science turn them into war machines.
 * And the beastpeople? Same as above, except replace 'war' with 'sex'.
 * What about the "power of humanity" that the end of the second game relies on? The Zophar fight could be explained by the Lucia getting the confidence to resist (after not even trying before Hiro and friends came along), but during the Ghaleon fight the party gets their abilties back out of nowhere, which seems explicitly magical.
 * That's just what you get when you mix Rule of Cool with a party full of Determinators. It's more like chemistry than magic.

Possible Lunar 3 guesses
If Lunar 3 were to be made, it's possible the protagonist could be female for a change of pace. The companion baby dragon would be either a black or a blue dragon. If it were a black dragon, it would randomly cause status ailments to enemies. If it were a blue dragon, it could randomly heal a party member's status ailments.

Lunar is the far future of the Marvel-verse
And Althena is a super mutant on the level of Apocolypse or beyond. The evolutionary epoch has ended and humanity is mostly stable, so there are far less random mutations showing up.

She is likely an artificial mutant, her lineage created things and made magitek usable and renewed the environment everlasting, as well as a knowledge keeper. When Zophar showed up four or five of these Athena-mutants types merged, making Allthena and the dragons (who help control her powers).

Lucia is a remaining Athena-mutant, predisposed to being dutiful and non meddling with humanity. Beastmen and the Vile Tribe come from stabilized mutations passed down.

Zophar's presence was corrupting Althena's Sword or preventing its power from being usable.
Which is why Nall didn't give it to Hiro until after Zophar was defeated.
 * The alternative being Nall was either being a Super Dick or he forgot he had the thing.