A lot has already been said about this ending; that it's 'lazy' or 'pointless' or even that it shouldn't exist at all. That, however, is not what we're here to talk about. The intent of this thread is solely to focus on and analyze the story as shown through the opening scenes and the scenes which up to this particular ending - to flesh out the thoughts and reactions your character has, evaluate his actual knowledge, and draw a conclusion that should be brought to light. The gameplay, the merit of this ending, and other such matters are separate topics entirely, and discussion of such deserves a separate thread from this.
And now that all the obligatory fluff is out of the way, let's dive right into the matter and take a closer look at the video you watched above.
The story begins with your character, Ajay Ghale, lost in thought. He sees his mother's last words - her wish for her to be taken to Lakshmana, before he drifts back into the real world. In the back of a truck, he listens to a voicemail received from a travel agent, and the story begins to be told.
There are several important things mentioned in this call, which are particularly relevant to the alternate ending; the first of which being his missing Kyrati citizenship. Without any other knowledge, it can be quite easily inferred that Ghale had once possessed a Kyrati citizenship, or at least believed he had, by the fact that he had told the travel authorities so. The fact that it is missing is exhibiting that someone had deleted it intentionally, or at least that it had been lost by unrelated means. This is more important later on, though.
What is important now is why Ghale is in this particular van, going down a winding road towards this place called Kyrat. We know he has his mother's ashes, and we know he wants to spread them at Lakshmana, but we do not know why he is taking this questionable mode of transportation over any other available means. Then the person in the voicemail goes on to warn Ghale of the turmoil in the area, caused by the Golden Path; this is the first information given on the world you are about to embark upon, thus it is worth giving attention to. The person leaving this voicemail is clearly outside of the conflict in this area; in his job position he is working for the general country, not specifically Kyrat, as is made evident by the fact that he speaks of granting clearance to all of India, not just Kyrat in particular. This is important, because it removes him from a position of bias; he can only know what is observed of the region, and that observation is that the Golden Path are heavily disrupting and even negating the government's influence on the area. As Ajay Ghale, who knows neither side of this conflict as of yet, the only thing he is aware of is that the Golden Path are causing trouble for a government which he has no reason to distrust. Granted, he has no reason to care other than that it clearly forces him to get to his destination by less than convenient means, but it is still important to take this into account; Ghale's initial disposition should by all accounts be against the Golden Path, as nothing is explicitly said or done to indicate otherwise.
The next scene is of the man across from Ghale requesting his passport. Your character turns abruptly, and hesitates for a small moment in handing the passport over. This is the first body language your character conveys outside of caressing the vase of his mother's ashes, and it is relevant in that it portrays to the viewer an uneasiness with the person speaking. It is not conveyed why this uneasiness exists, simply that it does; for whatever unknown reason, Ghale does not entirely understand or trust this person who is requesting his passport, so he is startled when he speaks, and is hesitant to meet his request. The man proceeds to slide a bill of what can only be assumed to be Kyrati money in, and instructs Ghale to relax and let him handle what is up ahead. Ghale give no sign of acknowledgement; rather, he takes his passport back and looks down at it, avoiding the other man's eye contact as soon as possible. This once again serves to further the unrest and wariness between your character and the man across the aisle from him, despite the man's seemingly helpful attitude. Even though he does not openly pose as a threat to him, Ghale makes efforts to avoid him, even looking out the window to take his mind off of the discomfort he is feeling. Whether he feels uneasy over other matters is irrelevant in this context; outlying factors aside, the man across the aisle is portrayed as someone who isn't trusted in Ghale's eyes.
Then, of course, things get interesting; the van arrives at the checkpoint. The man behind Ghale hands him his passport, and he takes it along with his own and passes them to the woman in the front, presumably to give to the guards outside. A commotion can be heard, and when Ghale asks what is happening, the man across the aisle hushes him, which leaves Ghale to look out the window and see for himself. The guards can be seen arguing with the van's driver, who refuse to take the passports the driver offers. They look in the distance to see Pgan's chopper is on schedule and continue to delay the driver through conversation and inspection. When the guards begin to inspect the side of the van, Ghale turns to see two armed men jump out of the back of the van, and run straight down the road they came from. The action begins, and the guards open fire on the running men. They return fire, but do not return to Ghale at any point; they were either killed by the guards or fled the scene. From their attire, it can be seen that they were wearing a yellowish gold; if Ghale were to put two and two together, he would deduce that these men were not only of the Golden Path, but that they grossly failed in their goal to protect the van from the 'enemies' outside of it. This, once again, puts another negative impact on how Ghale would view them, but only if we assume he makes that conclusion.
As the guards take their attention away from the two men who fled, the driver pulls out a pistol and shoots the guard commander in the shoulder, after which he is promptly gunned down. At this point, all hostile targets have been eliminated. One of the guards looks towards the van, then back to his commander, who gives the order to fire on it. What this exhibits is that these soldiers outside are not 'inherently evil'; they ask before shooting, and only fire at targets that pose a direct threat. Even their body language emphasizes this; before the armed men emerged from the back of the van, not one of the three soldiers held their weapon in a manner to suggest that they were in any hurry to use it; the guard with the detector holds his weapon loosely by the grip, and the other two hold theirs in equally non-threatening stances. The commander in the red hat is the only one who displays aggressive posture, and the only one to point the barrel of his weapon at anyone before the armed men appear from the van. This body language shows blatant passivity; despite their occupation, they do not bring their weapons to bear, or make themselves look threatening to the van passengers who they believe to be civilians.
The commander, on the other hand, is an exception; he does not look for the helicopter, he does not express passive body language. He is the 'bad guy' of the scene, and he plays the role well. He is the one who antagonizes the driver, the one who points his gun at him before the men from the back of the van make their run. After all the armed enemies are dealt with, he is the one who orders his men to open fire on the van. He wants the bloodshed, which easily characterizes him as a villain. So, technically, we found one villain so far, and as we soon discover when the chopper lands, he serves Pagan Min. This sort of behavior is to be expected of a person who works under the story's touted big bad, as any villain would reward such carnage and elimination of his enemies.
Yet, that is not what occurs. When Pagan arrives on the scene, he expresses extreme displeasure at what he is witnessing. He then proceeds to ask the commander for an explanation for this display which he did not order, and when the commander's explanation does not satisfy, he removes him forcefully. These scenes clearly exhibit Pagan's unhinged personality, yet nothing he has done so far is inherently 'villainous'; it is excessive and brutal, of course, to murder the man who disobeyed your orders, and it conveys that Pagan is certainly not a morally 'good' person. That being said, the man Pagan kills has been clearly exhibited as not only evil, but also an outlier; only the commander was aggressive and bloodthirsty, and only the commander was punished. The rest of Pagan's men are only guilty of not intervening when their commander was killed, which is morally questionable but still mostly understandable given their position, and made more understandable when you take into account that they were already following orders from the commander that they did not wholeheartedly support. So, what we have as of now is a dead and morally 'evil' commander, who was dispatched by his superior due to his 'evil' actions. As of this point, Pagan has only revealed himself to be a brutal leader, not intrinsically an evil one, by violently disapproving of the shootout that transpired.
Now the commander lays on the ground, dead, and Pagan turns his attention to Ghale. He tells the corpse that he didn't fail entirely, as he looks at your character with no hint of malice on his visage, other than the commander's blood. Returning to the matter of body language, this clearly shows that, at least initially, he has no quarrel with Ghale, nor does he feel any desire to enact violence upon him. He speaks of recognizing Ghale's eyes, hinting that he's seen them before, and then tells him about a grand adventure before one of his men throws a bag over his head. Although the bag is clearly a somewhat hostile act, nothing else done toward you suggests any sort of malice; all Ghale currently knows about Pagan Min is that he murders those who disobey his orders and he knows who Ghale is, nothing more. He has every right to be afraid of Pagan, but there is nothing that makes him a 'villain', at least not yet.
The rest of the opening is relatively uneventful in terms of what is relevant to the point we're building up to; Pagan plays with Ghale's mother's ashes, which incites a reaction from Ghale although one of Pagan's men stops him from acting further. Pagan attacks the man who had been sitting across from Ghale in the van, and reveals him to be a member of the Golden Path, calling him a terrorist and taunting him to show the hopelessness of the situation. After sending him out to be interrogated, Pagan implores Ghale to wait for his return, and begins a phone call before departing.
Now, at this point, you know almost nothing more than you did before; Pagan is unsettling and brutal but has yet to do anything strictly 'evil', and the Golden Path are 'terrorists' which you know to be actively opposing the national government. You know Ghale didn't trust the man across from him in the van from the start, and now it turns out that man was a member of the aforementioned 'terrorists' you have no reason to desire involving yourself with. The game, at this point, puts the controls in your hands, and expects you to make what it believes to be the most rational choice; escaping the dining room and running off to join the Golden Path in their fight against Pagan and the government. However, from a storytelling standpoint, this is hardly the most rational choice; Ghale has no reason to trust the Golden Path, and his attempt to stop Pagan from disturbing the ashes clearly shows he is not afraid of the man, so fear fails to be an applicable motivator as well. Both Pagan and the Golden Path are established as unsavory options, the only difference is that Pagan seems to know Ghale, even though Ghale doesn't know Pagan. From Ghale's limited perspective, the most rational choice would be to wait for Pagan and attempt to get the answers to the questions he should logically have. Of course, if Pagan really is the villain, this option would surely result in Ghale's death, or torture, or some other terrible outcome.
Yet, it doesn't.
If you choose to make Ghale wait for Pagan, he apologizes once again for the inconvenience, and ushers Ghale to follow him. They take a helicopter out to a small building as Pagan explains the story of your character; at some point after you were born, your biological father sent his wife to be Pagan's prostitute, but she and Pagan ended up falling in love and eloping. They had a child together, and when your father found out, he became outraged, had the one-or-two-year-old girl killed, and forced your mother to take you and flee to the U.S. As he explains this, Pagan walks Ghale to the building, which turns out to be a crypt for the ashes of your sister, whose name was Lakshmana. As you realize this was where your mother wanted to be put to rest, you set her urn next to her daughter's, and leave with Pagan. The credits roll, and that's the end of it.
Now, from a viewing perspective, we know enough about Pagan Min to see his motivations, his reasoning behind who he is and what he does. He fell in love with a girl, started a family, and then had it brutally and mercilessly shattered by the Golden Path - specifically, by a man who was supposed to care about the woman he loved, but didn't. It is hardly difficult to figure out that his eccentrically violent traits could have been brought on by such a traumatic event, and when you consider that the Golden Path actively condoned the murder of a small child, Pagan's hatred and even torture of their ranks is easily justifiable in comparison. These are people who we know fight against a government we know nothing negative about, who send their wives to be spies in their enemy's houses, and who are willing to commit infanticide for no reason other than righteous fury. Yet, if you leave the dining room, if you abandon Pagan when he asks you to wait, the game leads you to believe that the Golden Path are heroes and rebels, fighting against oppression and injustice.
When a game wants you to think of yourself as a hero on the right side of a war, and right out of the gate it portrays that 'right' side as more morally corrupt and unjust than the 'wrong' side you're combating, something has gone critically wrong in either the story itself, or the way it is portrayed. Pagan Min is a great character, but is ultimately not a villain at all - if anything, he's the antihero for viciously fighting the people who took his chance at a family away from him. He's by no means morally sound, but he's still fighting a characteristically 'evil' force, which makes him look heroic in comparison. The alternate ending that so many people are loving to hate, as it turns out, is the most morally positive and logically sound choice Ghale can make, as the alternative is siding with the Golden Path and condoning their actions. Which leads us to the inevitable conclusion; the 'villain' is more of an antihero, the 'heroes' are the real villains, and the first option you are given holds the rest of the game out on the choice that makes less sense. Ultimately, the best story is only an easter egg, and the tragic outcome of you following in your child-murdering father's footsteps by joining the Path is the 'main' plotline you are expected to gladly follow - and this is the story that was so heavily prioritized upon. Make of that what you will.