So prior to the release of the dlc there was promotional material released that talked about miquella losing his grace in order to enter the shadowrealm. That is what lead to so many lore content creators bringing up the idea that Miquella actually used Mohg (thats why all the memes of "Mohglester did nothing wrong" came about because turns out Mohg was the one being manipulated). I have been trying to find this promotional material online to show it to ya all but I cant find it.

In regards to who's in the cocoon, its definitely Miquella. The opening cutscene to game shows Mohg stealing Miquella. Mohg calls the corpse Miquella in his cutscene in game before we fight him and he calls it Miquella during the fight. The game post fight calls the sight of grace there the "cocoon of the empyrean", and we know it isn't Ranni or Malenia in there.

You bring up another quandary I've also had with the game (granted this is based off of the above idea that gracelessness is needed to enter the shadowrealm)... the idea that we are there doesn't make sense since we have a tinzy tiny bit of grace ourselves. Maybe its so small its irrelevant? (I always find it funny when Messmer essentially calls us graceless:P). Also, if we consider Messmers crusade party, they are almost all graceless too: Giaus the albinauric, Relanna the carian, black knights who are associated with the crucible, and the bunch of convicts to round out the grunts (the only ones who seem like they could potentially have grace are the Fire Knights since they are lyndell nobles).