So, these just came to me in a dream this morning, just before I woke up:
1) Xander's forgetfulness1 is actually a spell he cast on himself, beyond what the magical contract stipulated, that wiped his memories. To what end, and why, I'm not sure, but I speculate that it has to do with an ancient betrayal, or some dark secret related to Halo. Which leads us directly to--
2) Halo is actually the Phyrexian Oil! We know they were there before. We've been told that they were beaten back. What if they've always been there, and are there still?
3) This one just came to me: Language is a tricky, slippery thing. If there's no word for something in a language, and no close approximation of the thing in the other languages with which that language has contact, that language will resort to a native metaphor and/or simile. Demon->Phyrexian. An unspeakable horror bent on consuming and assimilating all life becomes an evil thing offering a dark bargain. Bonus points if the Phyrexians were actually/also the Angels.
1I quote: "It was so long ago that I signed the contract, time and the magic of the pact have distorted my memories. I was also not present for the great battles that took place . . ." Xander trailed off, lost in thought a long minute. "It is part of why I hunt for the information now—to fill in the yawning gaps of my memories that threaten to swallow me whole."
So, I was 2/3rds right on 1), but completely wrong on the other two. I'd say my Meat Loaf record1 still stands.
However, I have a new hypothesis: Since Halo is made from the tears of salty gamers upset about the lack of fidelity to the source materialwhat is essentially ground up Angels, and Angel blood is the vital component of Vampirism on Innistrad, Halo can be made on Innistrad, from Innistradi Angels. Furthermore, any plane with Angels might be able to produce Halo. Since New Phyrexia alreadyhasAngels, we may already be totally fucked...