2. That actually seems like a likely explanation for why they thought there was a power there. Though I did notice that the Castles seemed to all be built on top of a mountain-like structure, so...I suppose they could've carved them out of those? But there also didn't seem to be resources for things like swords and books, either (and I'm pretty sure I spotted some flags in the background early in the Prologue). So this place NEVER had any resources, it looks like, yet it still had stuff. Also it didn't seem to have...the ability to sustain life. As far as I can tell there was no food or water (unless for some reason the Ancients didn't need any, which..I suppose they didn't if they were able to fight this huge war).
...Fuck it, it'll drive me insane if I keep thinking about where the hell they pulled all these resources from. Yeah, the humans probably saw nothing there and thought they would need some huge power to make them. I can't really see why else they would think that.
Oh, but speaking of water, something I thought was really odd...why did it start RAINING, of all things, at the end of Repercussions?