Hey, I have managed to improve upon this theory quite a bit. It is now much closer to completion. Although Cinderella still is the problem, I now think I know how to go about tackling it. I have retyped up the entire theory, as even with some of the stuff already mentioned, I have managed to improve upon what was already said. This is a realy long post, but trust me, it is worth the read!
Some really important quotes from the episode (some may be off, as I don't have these quotes written down, if you wanna correct them I'll edit this first post):
"Every Fairytale needs a good old fashion villain." - Moriarty
Sherlock: I never liked riddles.
Moriarty: Get used to it, because I owe you a fall. I owe you.
John?: What kind of criminal leaves clues behind?
Sherlock: The kind of villain who wants to boast, to show off (something along those lines)
"I love newspapers. Fairytales, pretty grim(m) ones too." - Moriarty
So these are some quotes that I will be bringing up in my discussion. So the first one I would like to mention is the "what kind of criminal leaves clues behind"? When Sherlock responds, he is clearly talking about Moriarty. However, in Moriarty's grand scheme of things, in all the episode, what clues did he leave for Sherlock? The code? Well he stated that was fake, so that doesn't appear to be a clue at first glance. The crumbs? Well that was a clue for the kidnapping portion. The gingerbread cookie? That seemed to be more of a message "run, run as fast as you can". It actually appears as though Moriarty left no hints behind as to what his grand scheme was. But if he left no hints, then why is he so disappointed that it was so easy to take down Sherlock? Surely it would be disappointingly easy to take down anyone with a gun. Moriarty wanted a challenge, and hence he wanted to leave clues. So where are they?
This brings me to "I never liked riddles". "Get used to it, because I owe you a fall". So here Moriarty stated "get used to riddles" then "I owe you a fall". I intend to think of this as a riddle itself. The obvious thing to do is to look at it as "I O U" as many people have done before me. Now, I would like to perform a direct letter to number translation. A = 1, B = 2, and hence I O U = 9, 15, 21. So where do we go with that? In the episode, Moriarty gives Sherlock a book of Grimm's Fairy Tales, of which Sherlock skims through. It is even shown in a flashback the table of contents from that book. Matching up these numbers with stories, we get 9 = Twelve Brothers, 15 = Hansel and Gretel, 21 = Cinderella.
The middle story is Hansel and Gretel, and the middle of the episode is the kidnapping. The children leave behind a trail to follow (lemon seed oil) like the breadcrumbs, they are taken to a candy factor and fed until they died (as the witch intended to kill them). The connection here is so obvious, Sherlock states this explicitly in the episode, and is even how he went about finding the children. This is clearly nothing new.
The first story is 12 brothers. Now, this is mostly an unfamiliar story. I recommend reading it:http://www.pitt.edu/~dash/grimm009.html but here is a short version.
A king and queen have 12 sons. Queen gets pregnant. King only ever wanted a daughter, so he says if the queen gives birth to a girl he will kill all the 12 brothers, but if he has a boy he will let them live. The queen sends her sons into the forest and says "If I have a girl, I will wave a red flag, stay in the forest. If I have a boy, it's safe to come home and I will wave a white flag". The queen gives birth to a girl, and so she waves a red flag and they stay in the forest. The daughter then grows up and sees 12 cots, and asks who those belonged to. When she finds out she had brothers, she goes into the forest to meet them. They ends up staying at the cottage with them for a bit. Then she finds flowers and picks them. It ends up those flowers belonged to a witch and put a curse on the girls brothers. The 12 brothers are turned into ravens. In order to break the curse, she must remain silent for 7 years. A king strolls through the forest and sees her and falls in love. He takes her home and marries her. The king's mother says things like "she is evil" and "the devil took away her voice" and things like that. Eventually she convinces the king and the king sentences the girl to death. At that moment 7 years has passed, the 12 ravens turn back into brothers and save her in the last moment.
The connection:
There are 12 jury members (brothers) whose lives were threathed based on the binary decision (innocent or guilty, boy or girl). So there is a connection.
Now here is where things get really interesting...
Moriarty stated that "Every Fairytale needs a good old fashion villain". Initially, I interpreted this as the reason why Sherlock needed Moriarty, cause Sherlock needs that villain to be complete. However, I now think this is wrong. Moriarty actually intended to turn Sherlock into that villain.
When the two kidnapped children saw Sherlock they screamed. This set up the whole third act where people then began to suspect Sherlock responsible. But I think there is more. To the children, it would appear Sherlock was the witch from the story. Sherlock is the villain.
Further, if we now assume Sherlock is the villain of the 12 brother story, that places him as the mother of the King. She spoke out against the silent girl, called her a villain and evil. During the court case, Moriarty remained silent, while Sherlock took the stand and spoke out against him. Called him a villain, said he is not even a man but a spider. Moriarty gave no defence (remained silent) so the judge had no choice but to say he is guilty (as the king did). In the last second, however, the 12 jury members (12 brothers) came to the rescue of the silent one.
So with Sherlock as the villain, the entire first story falls into place. So in fact, both 12 brothers AND hansel and gretel are nearly enitirely told through the court case and the kidnapping.
I O U a fall. This is actually a list of events.
I - 12 Brothers -court case
O - Hansel and Gretel - Kidnapping
U - Cinderella - ??
a Fall - The conclusion to Moriarty's plan.
Now, it should be noted that in the end, Sherlock is the villain from the perspective of the newspaper. Throughout the episode, there is repeated references to newspapers. John is constantly worried about how the public perceives Sherlock, while Sherlock constantly brushes it off. Moriarty wishes to teach him a valuable lesson. He says "I love newspapers. Fairytales. Pretty Grimm ones too". It is the newspapers themselves that are the fairytales. At the end of the episode, the newspapers report that Moriarty is innocent, that Sherlock spoke out against him at the trial, and the jury saved him. The newspapers report that Sherlock kidnapped the children and fed the candy.
This whole time I have been ignoring Cinderella. The last time i mentioned this theory, everyone agreed Cinderella was the weakness of the story. But now I know more. Now we know Sherlock must be the villain of the story, and we know it must be from the newspaper's point of view.
So what?
I believe that it was actually Sherlock's job to complete the Cinderella story. On the rooftop, Moriarty is extremely disappointed with Sherlock. Sherlock was unable to figure it all out. However, there was a moment things changed. Moriarty and Sherlock stared in each other's eyes and Sherlock claimed "I may be on the side of the angles, but don't think for one second I am one of them". This is the point Sherlock is acknowledging what Moriarty was getting at the whole time. He was the villain. However, I don't think Moriarty would simply accept this, Sherlock had to prove it. Somehow, Sherlock completed the story of Cinderella and had some form of evidence for this. I believe that Cinderella is the key to figuring out what Sherlock did.
Now if Sherlock is the villain, then he is clearly the evil step mother. The evil step mother neglected Cinderella, wouldn't let her go out, and would give her tedious tasks to do. I think the clear choice for Cinderella is Molly. When Sherlock solved Moriarty's riddle, the first person he went to was Molly. And then he told her "You were wrong, you do matter". I think this meant more than just trying to make her feel better so he would help her. She was fundamental to the whole puzzle.
Further, on the rooftop Moriarty tells Sherlock he is going to kill all his friends.
Sherlock: John
Moriarty: Everyone.
Sherlock: Mrs Hudson
Moriarty: Everyone
Sherlock: Lastrade
Moriarty: Three bullets... etc.
Why not Molly? Moriarty knows Molly has some sort of relationship with Sherlock. Sherlock is famous at this point, I'm sure any worker in the Morgue would be happy to help Sherlock out, yet he keeps going back to Molly. At the very least, Moriarty knows Sherlock doesn't wish her dead. So why neglect her when he clearly intends for "Everyone" to be the victim. It's because Molly is a person of interest. She is Cinderella.
If we can figure out what Sherlock then did, as the evil stepmother, I personally believe we will know if Moriarty is indeed dead, among other things.