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Okay, that last update was far too image-intensive and took forever to do. From now on, I'll be doing a lot more transcribing. Just as a reminder, if at any point in-game text is within parentheses, that's Edge's internal monologue.
Chapter 3 - The Battle System, and BWARGLE
This tutorial screen pops up once Edge gets back on the dragon. Instead of screencapping every single topic, I decided to grab some battle screencaps and I'll describe the battle system through commentary.
Panzer Saga, like most of its contemporary RPGs, used a random encounter system. Depending on the current probability of attack (indicated by the radar's background color), after a few seconds of flying around, the screen would freeze and slowly go white as the battle music crescendoed.
Each battle starts with a flyby of Edge and the dragon and a dialog box popping up with the name and type of enemy they were facing. The type icon was either Pure Type monster, Mutated monster, Imperial force, or Black Fleet (Craymen's force), and there were four colors the icon could be: green (common), yellow (sub-boss), red (boss), or blue (rare). The icon here means that the Pattergo is a common Mutated monster.
And here is the normal battle screen. On the left are the standard gauges for HP and BP (Berserk Points, Saga's version of MP), in the middle is the battle radar, and on the right are the action gauges. Like RPGs such as Final Fantasy II/III and Chrono Trigger, the gauges increase as time passes during battle, and once one or more gauges are filled, battle actions (attack, use item, etc.) can be taken. In another similarity to those games, when multiple gauges are filled, either multiple actions can be taken in a row, or more powerful actions which drain multiple gauges can be used. The battle radar in the middle is where Panzer Saga really differentiates itself gameplay-wise from other RPGs, and is the source of much of the game's complexity and strategy.
The first two Panzer games were unique in their implementation of a 3D rail shooter in that the POV of the player could be turned 360 degrees - even though the dragon always flew forward, the rider could face forward, to either side, or backward. This allowed enemies to come up from behind or the sides or to end up there after appearing in front, so that enemies missed the first time around could still be tracked and shot down. Panzer Saga took the basic idea of this mechanic and ingeniously reimagined it for RPG gameplay.
During every battle, Edge and the dragon circle around their enemies and are either in front of, to either side, or behind them, and the attack characteristics of both sides can dynamically change mid-battle depending on their relationship to one another. For example, in the shot above, Edge and the dragon are to the left of the Pattergo swarm, and Pattergo are unable to attack to their sides or rear - hence the green areas shown on the radar. However, they do have a powerful attack that they can fire directly in front of them, represented by the red area. In other battles you'll see clear areas which represent somewhere you're likely to be hit by a weak attack, and gray areas where the dragon cannot go. At any point in time, either the enemies or the heroes are allowed to move to a new position in order to change the battle conditions - however, this offers a disadvantage as the battle gauges of a moving character do not charge (meaning that your gauge stops charging while you move but continues charging when the enemy moves).
As it was in both previous Panzer Dragoon games, you start out with the ability to attack either with the gun of the rider...
or the lock-on lasers of the dragon. The lock-on lasers are more powerful than the gun and attack multiple enemies at once, but they cannot be aimed (they'll simply hit the nearest targets).
Once all the enemies are defeated,
you get a screen that judges your performance on the amount of time spent and the amount of damage taken, and rewards you proportionally (much like Okami does).
Sometimes, you'll start battles in different places...
Even if that's the place where the enemy can attack you.
Panzer Saga also includes detailed information on every enemy, allowing you to examine them at your leisure and see your best battle performance against each one.
Back to the actual story, as Edge and the dragon explore this new portion of the valley, they run into a giant fan that has a "break" label on it but the dragon's lock-on lasers are too weak to destroy it.
In the game's first example of battle strategy, I face a group of Pattergo that is being led by an oddly colored one that continually heals itself and its fellows. I'm too weak currently to take them out in one hit, so I wait for multiple gauges to charge up and then attack repeatedly, not allowing the leader enough time to heal.
My jubilation is short-lived, however, as Edge runs into a barrage of those giant fans around the next bend. Turning the other way, he flies to a dead-end with another tunnel in it, and once inside, he nearly gets his ears blown out.
I wonder what that device is for?)
Only way to find out is to fuck around with it, kid.
Is it because the device shut off?)
There's no wind pushing me back! But now, the monsters can enter too. I hope this wasn't a mistake.)
I don't think he needs to worry about this, considering he's riding a DRAGON THAT SHOOTS HOMING LASERS.
Past the wind net is a battleship that has crashed right into the middle of the valley. Accessing the wreckage reveals a recorder/black box that holds a chilling message.
...Do you have any idea what this means? There's no reply from Lord Craymen's ship!
...I cannot let that dragon fall into the wrong hands...
All units, man your battle stations!
It's too late. Missiles rapidly approaching...We can't evade!!
(The dragon was stolen from them? ...Could there be more dragons!?)
Of course there are. Ones with tiny wings, spineities, teeth made out of consummate V's, and big beefy arms that look really good growing out of the back of their necks.
As Edge and the dragon fly together, they find themselves becoming stronger. Edge is getting to be a better shot, and he's noticed that the dragon's homing lasers are striking their targets a bit more fiercely.
A new pair of enemies show up, and these guys have another feature of the PDS battle system - a weak point. When they turn to face Edge, they can now attack, but they also expose their weak point...
which Edge quickly exploits. (Obviously, attacking a weak point does extra damage, usually at the cost of increased risk of getting damaged.)
Another level. Edge feels a new type of power stirring within the dragon, just in time for a visit with the game's first sub-boss.
This enemy was identified as "Baldor Queen." The phrase "ugly bitch" has rarely been more appropriate.
On top of being visually repugnant, the queen also periodically spews a pack of baby Baldors, which was the last thing Edge needed her to do, so Edge decides to test out the new power he felt the dragon gain a few moments ago.
A bolt of energy flies out from the dragon and darts from enemy to enemy, striking them all in succession before flying off into the distance.
That certainly did the job, didn't it?
With the babies out of the way, Edge returns his attention to the queen. The dangling sac underneath the main body seems to be its weak point, and when she re-spews another brood, Edge ignores them and instead contintually darts from one side of the queen to the other, taking shots whenever the opportunity presents itself until the creature is dead.
is that a passageway?)
Sure looks like it. Don't worry, it's no Niagara - fly right on in there!
In the hidden tunnel are a few useful items, including an "Extra Class" berserk technique called Energy Prism. Nice! Returning to the air, Edge and the dragon fly around, fighting a few battles and gaining another level up to 4, where the dragon learns a new Berserk technique called Phantom Slashers. With all these new Berserk Techniques showing up, Edge decided he wanted to see if they really were all that and a bag of chips.
Energy Prism was described by the in-game manual as an "unstable laser." Unstable-y powerful, more like. Phantom Slashers doesn't do all that much in the way of damage, but six green translucent discs hovering around the dragon and then slicing through the targeted opponent in succession sure did look pretty cool.
At the next dead end, Edge and the dragon pick Waterfall #2, as it's the one with the tunnel behind it that leads out of the current area - only to find themselves in more of the same.
Edge gets ready to wax philosophical in a long soliloquy, but gets interrupted by the dragon suddenly halting in mid-flight.
Whoa! What? ...What's wrong?
Edge hears a loud, rhythmic thumping noise off in the distance, and notices huge plumes of dirt firing off into the air at regular intervals. He watches the progress of the explosions of dirt along the cliff edge for a moment,
wonders 
aloud,
and decides to investigate further.
As Edge rounds the corner, all he sees is a lone figure racing across a stone bridge, riding a coolia. What could have been causing all the commotion?
BWARGLE
A huge, floating creature that looks suspiciously like a 
suddenly came bursting through the mountain wall. Edge hopes the dragon doesn't mind the back of his neck getting damp.
As Edge works through his mild panic attack, the guy actually being *chased* by the creature seems a bit more confident in his escape, as the bursting through the wall caused a bit of an outdoor cave-in, most of it landing squarely on top of its misshapen head.
Yeah...that didn't so much work, as it did not work.
Luckily, here comes Edge to save the day (I just noticed the dragon even has Mighty Mouse's colors!), and the battle with the boss Arachnoth begins.
This guy is big, bad, and backed against a wall, so Edge can't fly all the way around him. He has a feeling that if Arachnoth is going through this much trouble to protect his back, it's gotta be worth hitting.
Edge dodges to the side to get out of range of the more damaging attacks, and the Arachnoth turns to face him, leaving his back exposed. Ah ha! Once all three battle gauges are filled, Edge quickly repositions himself on the back side of the huge beast and lets the dragon go, unleashing three lock-on volleys into the weak points on the monster's back.
This much damage enrages the huge beast, and when Edge tries dodging to the side again, Arachnoth stops fucking around...
and flat out EATS him, dragon and all. Thrashing wildly, the dragon manages to escape from the beast's mouth, but not before taking moderate damage. Edge tries swinging around to the front to see if that has become a more advantageous position, but before he can do anything, the crazed monster charges headlong at him, hurting the dragon again.
Fortunately, in its blind rage, Arachnoth's charge was so hard that it slammed its head into the mountain wall and knocked itself out. With its back exposed once again, the dragon fires a few more volleys and the deed is done.
With the valley once again safe, Edge lands the dragon next to the mysterious man who he saw running from Arachnoth. Who is he? What did he do to provoke the beast? And perhaps most importantly, does he have any clean underwear?
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