Yeah, we were starting to get off topic =/
Anyway, from what you've researched about "ethereal" (since those are ethereal blades), it's starting to sound like an illusion.
I have a new theory:
The EE (emphatic entity) must be connected to Xemnas because of the hood and ethereal blades, right? And since it appears in BBS, it must have used the ethereal blades first, correct? So, this person must have had a huge influence on Xemnas (
and therefore Terranort and Mastser Xehanort ) since Xemnas uses the same things.
So that's why I think it's Master Xehanort's master.
However, there is a problem with this theory: why doesn't he wield the Keyblade? My answer: he can't anymore because he's turned into a Nobody.
Think about how Nobodies refer to themselves: empty shells, beings of nothingness, basically ILLUSIONS (like your definition says).
Soooo...this is the NOBODY of MASTER XEHANORT'S MASTER! This explains:
*why Xemnas uses the same blades
*why this Keyblade Master doesn't use a Keyblade
*why he uses a new stance that bears similarities to Ven's and Vanitas's