Shenmue Dojo

Okay, it's very long time ago that i played Shenmue II on DC, it's really after it was released. (Sorry for my english)

What do you think Ryo Hazuki would doing in the third game? Will he defeat Lan Di or will he very wisely and forgive him?

There are many ways how the story could turn out. Lan Di could be pushed aside by another Chiyoumen member that is more evil then him. Maybe even killed. Shenmue III Gang Edition has taken that route, though I don't think Niao Sun would be the one to do something like this.

I think it's however pretty safe to assume that Ryo loses his desire for revenge at some point before the confrontation with Lan Di. Shenmue II hinted that, as Ryo has to calm down and push his thoughts of revenge aside because the people he meets force him to do so.
There has to be a fight though, no matter what. It doesn't have to be because of revenge but Lan Di has become to dangerous and because it's Ryo's "destiny". He might actually has to kill Lan Di then.

I personally think he has to die in some way or another or else Iwao's death and the entire hunt for the man in the green dragon robe would feel pointless.

feel pointless? No it wouldn't! You even state the point in your above paragraph. The player absolving his lust for revenge is a pretty big and worthwhile character arc...

Shenmue is a game about the journey, not the end result...

Well that's just how I think. Lan Di deserves to to be punished for murdering Iwao. Though this is Shenmue we're talking about, so it doesn't have to follow the typical plot in that situation.

Did Iwao have to die in Lan Di's journey? Maybe Lan Di's lack of mercy will be where Ryo is different. I'm sure if Lan Di isn't meant to be killed, somewhere along the journey Ryo will see some quality that makes Lan Di more human and not the embodiment of evil Ryo believes him to be. I think Xiuying trying to get Ryo to slow down enough to put his revenge aside at least for a moment gives us a good glimpse into where Ryo may be mentally/emotionally in the future. At some point though there will probably be an ultimate villain that Ryo will have to kill. That kill wouldn't be so much revenge driven as it would be saving the people the villain could harm.

Do we know anyone else Lan Di killed or do we only no about Iwao?

I expect Lan Di to perish but not at the hands of Ryo.

If the game was being created now after all the sandbox games that have come since the original game's creation, they'll make you choose between killing Lan Di, saving Shenhua and letting Lan Di escape, and something else that would be seen as an ultimate sacrifice for Ryo...

You... you don't mean trading all his capsule toys?!

Very interesting answers. I remind me, that there was a similar situation in Shenmue I. I don't know the name of this guy, but there was a bodyguard from an old master, in Ryo's age i think, and Ryo thought he is a villain. Both fight together and no one has won the fight and the guy was a friend. After this scene, Ryo and he are fighting through the docks. How i say, it is long ago i played Shenmue I and II. I think too by now there can be the same with Lan Di.

I doubt Ryo will ever become friends with Lan Di. You're right about Guizhang, how he was seemingly a vilian and then he helped Ryo. Same thing with Ren in Shenmue II. But those two are entirely different guys. Lan Di KILLED Ryo's father, Ren and Guizhang never did anything even remotely that evil.

Not sure about that Lan Di should die at the end of the game... Well ,what we know about a Lan Di?
We think he's an evil person, but does he really? We don't his true motives, don't know why he needed those mirror, we don't know even what are mirrors for - first game says that if we couple two mirrors we will release some sort of a Kraken, and the second game suddenly changes focus and we filled with controversial piece of info, which contradicts with the previous piece, that mirrors not for a summoning a monster, but against, serves as a key or some kind of a map to hidden treasures of some ancient Chinese dynasty. Ambiguous. Also there's such theories, floating in the air, like there's a third mirror (and who knows how much mirrors can be and what other possible purpose they may carry?).
Maybe Lan Di is not a real antagonist. Maybe he's filled with a wrong information, like that Iwao murdered his father (and whether Zhao Sun Ming is his father? And who he is and what his role in a game?), or this strange mirror is some kind of artefact that belonged to his family (whilst in reality it's not) and etc and etc. Guided by wrong assumptions, he takes that step. Also, Ryo grows mentally. Firstly, he was guided by the revenge. Through the games he evolves and moves to a point where's revenge is not the main objective.
Maybe Lan Di would die from the hands of Ryo, maybe he's not.
Maybe he would be killed by some other offended hands, hungry for a revenge.
Maybe he would turn into a big gigantic dragon and would be killed by an arrow fired by a Bard the Minstrel (Recall Tolkien's There and Back)?
Maybe they will turn to be friends, Ryo will understood true motives, that guided Lan Di, and will save him, or try to save him from some horrible obstacles.
There's a thousand ways that plot can turn on, and we wouldn't know anything until Suzuki reveals his own intentions.

The only possibility that Lan Di would die by Ryo hands is that he dies from falling over a Clift or that he falls on water and maybe Lan Di does not know how to swin but i really doubt that...
The only person Ryo sort of killed was shenmue main enemy Chai because he felt on the water which happened again during the boat trip... Dunno if he died.
For Ryo revenge is not killing Lan Di in his mind revenge is fighting Lan Di and defeat him in battle and sort of humiliating him.
Lan Di on the other hand is a high ranking Chi Yo Men and he is know to be ruthless. He has killed people before he killed Ryo father.
I trully believe shenmue series would not end on a third game or that we would fight Lan Di....
Shenmue III is to meet and defeat Niao Sun.
Shenmue IV is to defeat Hong Zi Ming, Xi Yiu Brother.
Shenmue V is to fight Lan Di.
Shenmue VI is to defeat the leader of the Chi Yo Men the main villain.

and that one of the reason we not getting a third game..
We would actually fight Lan Di till Shenmue V. Sadly I doubt Shenmue would reach that far with the current situation of the third game.