My weekly dose of "Kowloon" EVERYTHING BUT " Generic Romance".
They said that the prism in the sky was interfering with energy and some kind of resonance supposedly created this fake version of Kowloon.
We still do not know how it is decided that people can see this fake version. People that had no relation to this place are able to see and live in it (see our actress).
I reckon that you were right and the death of the Reiko B. put so much emotional stress on Kudou that he resonated with the prism and the fake city got created.
We also do not know the cause of death of Reiko B. . It was ruled a suicide by overdose but the sleeping pills supposedly were not strong enough to overdose on unless you took 10.000 of them (something like that was said atleast). Not even mentioning that she was right before a marriage.
I believe that she was used as a "labrat" for some new drug of that pharmaceutical company that snake boy is from. Maybe she willingly took it because she is "lucky" or maybe she got kidnapped and forced. The same company was responsible for destroying Kowloon. Maybe to hide their experiment? Snake boy also said that Reiko B. and her family probably hate their company, no reason stated though.
Edit: I dunno why the cross dressing boy is allowed to coexist with his older self. It could be that the older one accepted the clone as real or maybe he changed so much (getting rid of all the clothes and not dressing up anymore) that he is regarded as a different person.
DEFINITELY a hidden Gem. I feel like the name hurt some of its potential but made the 180 from potential romance to mystery more effective.