I felt like I just had to give this ep a 10. Intense! And dark!
From the looks of things, Ali made some boys (including Setsuna) kill their own families - that way, he would recognise them as soldiers of god. He also gave them some training - and Setsuna recognises his moves in the way Ali uses his MS. Setsuna seems to want to confirm that it is Ali and opens the hatch to Exia. Ali gets out too and takes off his helmet - Setsuna and him point guns at each other. Meanwhile, everyone else is rather shocked.
Lockon fires a shot between them to drive off Ali (couldn't target Ali directly since an explosion could kill Setsuna). Ali starts to leave and Lockon starts firing directly for him but misses completely.
Sumeragi tells Setsuna that she'll ask for his reasons later - for now, just go on with the plan. Setsuna calmly proceeds.
Flying down a narrow gorge to the enemy HQ, Tieria contacts Setsuna privately to say that if Setsuna does anything like that again, Tieria will fire on him.
On reaching the HQ, the 4 Gundams wipe out the remaining forces in a few minutes and the HQ surrenders. Meanwhile, Ali gets back to his personal squad - he'd told them to hang back.
Liu-mei feels happy with the result, but Sumeragi says based on her predictions about 500 people have died. She doesn't seem to happy about it... or Veda's long term predictions. Basically, things are going to get a lot nastier since CB just crushed a country in one day - it's raised the stakes for everyone a lot (eg allows AEU to be even more aggressive on military build-up).
Back on "Gundam Island", Lockon has just punched Setsuna, and demands to know the reason why Setsuna did what he did, but he doesn't seem willing to answer and Lockon threatens another punch. Tieria feels they don't need to know why and points a gun at Setsuna, since if this continues then it'll put the rest in danger - their mission has only just started. Lockon pushes Tieria's gun down, but Setsuna points a gun at Tieria and says he's not going to be dropped from Exia. Allelujah interrupts (while acknowledging he went against orders himself too) to say that Veda chose them all as Gundam Meisters and that Setsuna should have a reason to be a Gundam Meisters.
Setsuna says his life/existence alone is a reason - "I will survive/live."
Sumeragi gets a call from Liu-mei mentioning world-wide terrorist attacks - Sumeragi seems to have expected this and seems depressed. While Saji and Louise are wandering around a bus explodes in front of them.
Ian Vasty tells the Meisters about the simultaneous world-wide terrorist attacks. Over 100 have died already. Lockon gets a call from Liu-mei who says an anonymous group claims responsibility. They say they'll continue until CB quits. Tieria guessed that might be the case. Liu-mei says they don't know who caused and tells the Miesters to be on stand-by for now.
Lockon and Allelujah really don't like the terrorist actions but Tieria doesn't care - which pisses off Lockon, who hates terrorists (if you've read the background notes, you'd know why) but Tieria points out that from many people's point of view, CB's actions are considered to be terrorism too.
Setsuna calmly interjects that these terrorists have started an armed conflict and that it's up to CB to eliminate them.
Next week, looks like Setsuna will finally meet Marina.
I think we hear Setsuna's real name in this ep but it's really hard to hear with the BGM - pretty sure it begins with an "s" and seems to be short. Later, Setsuna wonders what happened to Ali's "god"... and Ali briefly wonders about Setsuna (he'd already noticed Exia's pilot was a kid and seemed to know Ali) and wonders if he might be from Kurdis but then dismisses the idea. I think Ali's "god" was always "money", but Setsuna doesn't seem to have realised this yet - he still seems to have some small level of belief in Ali's motivations. Wonder how long until those are shattered. Setsuna killed his own mother (?) in cold blood while she begged him - because of Ali.