Alice/Arisu's Affair {Spoiler}

[MeMyself]

When we first learn of Alice/Arisu's crush on a male teacher (the infamous masterbation scene), it looks as though the affair is all a fantasy inside her head. But in episode 11, it seems as though there was something real going on. Which was it? A fantasy or reality.

If Lain simply erased the memory from everyone's mind, except for Alice/Arisu, then it was probably just a fantasy. But if she erased an actual event as well, it would have been a reality.

Or were the writers just a bit careless with the continuity?

[Twilight Wolf]

It was a fantasy that eventually became a reality.

The "infamous scene" we saw was a fantasy, but evil Lain (the one knights created and was spying on Alice/Arisu) spread it as a rumor through out the wired and everyone naturally came to know of her crush on him, considering it's importance to society in SEL's world, (much like our world today).

Evetually years later after Lain reset everything, we saw in the last episode that Alice/Arisu must have pursued this fantasy and it came out successful, their affair became a reality.

[MeMyself]

I didn't recognize Alice's/Arizu's fiance as the teacher. You really don't get a good look at the teacher, except for a very brief scene. But I think the fiance was someone different. He looked about Alice's/Arizu's age at the time -- about 22.

But that doesn't really answer the question as to what was inferred in episode 11.