now I'm just confused let me try and answer you.
In the event you reset without losing my previous theory stands just don't apply it a loss in battle and replace it with some other factor that caused the timeline to fail.
After losing and not resetting they acknowledge your previous challenge and your pokemon retain the experience they got from it. The blacking out is just so you don't have to see a walk sequence back to the pokemon centre after each loss. I don't understand the confusion here. My knowledge is that if I save before the battle, lose, turn my game of and then turn it back on my pokemon will not have grow and the gym leader wont say welcome back.
One of us isn't interpreting the other very well but I personally don't see any conflict, my theory is just yours but reworded so that it is linked the the mechanism of the world as opposed to the abilities of the player.