1. It depends which one is more appropriate, but generally you'd want sizable armies on both sides. You don't want this ending up like Fire Emblem where one person can take out an entire army.
» Click to show Spoiler - click again to hide... «
2. If you decide to let them both live, what would happen during the coronation where Yggdra has to fight the one that died?
If you are trying to do a novelisation of the story, try not to change the story around too much.
3. I wouldn't bring in the ACTUAL card system, but the card skills themselves would be fine.