As mentioned, I’ve just seen the entire series again recently so I might have slightly fresher memories. But it’s clear from episode one “Arrival” that the story is allegorical.
The Village is most certainly the Global Village and everything from the endless parade around the city square to the ‘private’ signs outside of number 6’s dwelling to the very sinister salute of “Be seeing you!” was fairly well though out.
“Fall Out” being the second part of two part story starting with “Once Upon a Time” where 6, 2 and the butler recreate event that may or may not have happened in 6’s life. It’s “Waiting for Godot” on speed with nursery school props. Fairly intense and very strange.
“Fall Out” presents a couple of possiblities depending on one’s point of view.
1)Yes, it’s all some sort of bizzare dream along the lines of Chesterton’s “The Man Who Was Thursday.”
2). Number Six confronts the demon that makes him a prisoner and beats him. The Village is destroyed and freedom reigns, but it might be a false freedom.
3)The Village defeats Number Six by giving him what he wants – his freedom. Freedom is the final illusion, the big lie. The Village moves from testing stage to reality and becomes the world.
Not surprising, people have written their thesis trying to explain this show.
But, by god, is it fun! Thirty years later and you still can find people willing to talk about. If nothing else, a triumph in television.