Lyuze was not really inept against Casshern. That katar-thing that projects out of her arm (probably the blade of her sister’s sword) could obviously slice and pierce through his suit/skin/flesh. It’s just that his body had a way of dealing with that kind of damage, and apparently, the same just isn’t true for Dio. I think, showing that crucial difference between Casshern and Dio, who are supposed to be rather similar, is one of the main points of this episode.

Look at it this way. Lyuze lost to Casshern because of a surprise attack. Dio merely got foiled by Lyuze in pretty much the same manner.

As for that “sisterly hug”, I thought it was more than just that kind of thing. What’s sisterly is Sophia’s feelings for Casshern. As for what I think about Lyuze and Leda’s actions (and words, in Lyuze’s case) in this episode, just see my blog or my comments in Star Crossed Anime Blog. But I might as well give the warning that it is more or less from a shipper’s point of view.

By the way, about the “Casshern ate Luna” angle you mentioned… I never saw it that way, but now that I think of it, it does seem a possibility. Thanks for that insight.