|Good movie, flawed ending.|
Plot: Tony free's himself from his captives and explores the mansion and when he enters the Mandarin's living quarters instead of coming across "Trevor" he finds the place abandoned. As he goes through the items in the room he comes across a stack of blue prints. On top is something from Hammer Industries, then something from A.I.M. called M.O.D.O.K., a helicarrier blueprint from S.H.I.E.L.D. and an arc reactor blueprint from Ivan Vanko but underneath that is something that terrifies Tony. He drops the blueprint and the camera focus just on the title "Fin Fang Foom".
Cut to Mandarin surrounded by yellow clad A.I.M. soldiers in a massive hanger talking to Aldrich Killian, he compliments Killian on his progress with the battleship and we only catch glimpses of the huge battleship Fin Fang Foom and it's many, many weapons (gun towers, missile turrets, gun turrets, bomb bays). Mandarin ends the conversation telling Killian that he's ready for stage two, Killian shows confusion and asks what stage two is and he is grabbed by his bodyguard and knocked out by an A.I.M. soldier and dragged off not to be seen again for the rest of the movie.
Tony finds Rhodey in the Iron Patirot armor, gets the Mark 42 and both take off to China to stop the Mandarin.
Mandarin puts on an armored suit, dark green with gold highlights, sort of Mark 6-ish with a triangular power core and ten glowing "rings" on each finger, there is no helmet. Mandarin "plugs" himself into the chair of the ship's bridge and prepares it for take off.
Tony and Rhodey show up as Fin Fang Foom is ready to take off and fight their way through Extremis soldiers and A.I.M. scientists but they are two late, by the time they make it to the hanger Fin Fang Foom has taken off.
Fin Fang Foom is designed to look like a flying dragon, there is a mouth that houses a huge "arc laser" that can cause massive damage. A bridge where the eyes are, a long neck and then two large wings where the turbines are that it uses to lift off vertically and engines to fly forward then a long tail section. Picture something similar to a Romulan Warbird but more dragon-y. The thing is just covered in weapons as well and almost as big as a helicarrier and it's powered by an arc reactor. Mandarin designed it based on myth as a form of psychological warfare.
Realizing the scope of things Rhodey and Tony talk about what to do next when Jarvis chimes in about the basement being cleared. Tony get's his "I have an idea" look and tells Rhodey to focus on neutralizing the things offenses, he'll focus on the Mandarin. Rhodey asks Tony how he's supposed to do that and Tony replies "Don't worry, I got you." and then takes off. Rhodey shrugs and takes off. They split up with Tony going to the hanger bay to find entry into the thing and Rhodey heads toward the laser. As they approach Fin Fang Foom hundreds of Hammer-roids exit along with one man fighter jets.
Next is an extended scene of Rhodey Tony clearing out Hammer-roids and jets.
Tony finally gets into the ship but Rhodey takes damage and crashes into a gunner tower. Too damaged to get out Rhodey waits to get taken out by approaching Hammer-roids but the Hammer-roids suddenly get shot up and as the smoke clears it's revealed to be War Machine Mark 2. The War Machine armor helps Rhodey up and Rhodey looks out to see all the Iron Man armors joining the fray. War Machine Mark 2 opens it's faceplate to reveal nothing inside and the voice of R. Lee Ermey says "Get in soldier!" Tony replaced Jarvis with Sarge as the A.I. in Rhodey's armor just to screw with him. Rhodey smiles and sheds the Iron Patriot armor and gets back into his War Machine armor.
The arc laser fires and takes massive swath out of Hong Kong.
Rhodey goes after the laser, he converses freely with Sarge.
In the ensuing fight and disabling of the laser all the armors are taken out.
Tony confronts Mandarin. Words are exchanged, Mandarin explains on how he will use Fin Fang Foom as a deterrent to end all conflict. The only way to end conflict, he explains, is through being more violent, better armed and be willing to hit the other person first and harder than they would hit you. He explains that his ultimate goal is world peace, just like Tony, but he believes his way will work while Tony is just tinkering in a pretend world with his free/clean power concept. Mandarin threatens to use the laser again so Tony backs off and is restrained by Extremis troops. Mandarin orders Tony to submit to being killed but just as Killian's bodyguard is about to kill him Rhodey takes out the laser. A warning blares in the bridge and Tony uses the distraction to take out the Extremis troops and go after Mandarin. Mandarin is forced to uncouple his suit from the captains chair which leaves Fin Fang Foom rudderless and it starts a very slow descent.
Tony and Mandarin have an intense fight with Mandarin using his ten "rings" instead of the palm repulsors like Tony has, Mandarin's suit also has claws that can tear into the Mark 42. Tony eventually blows the Mandarin out the bridge window and tries to figure out how to take control of Fin Fang Foom. He eventually figures this out using his own armor but is forced to automate the Mark 42 to do it. He takes Fin Fang Foom out into the ocean and sets a course to crash it. He runs to the hanger to grab a jet to escape but finds them all gone. As Fin Fang Foom starts to dive into the ocean Tony falls out of the hanger and free falls for minutes. Thinking he's going to die he closes his eyes and then is grabbed by Rhodey before he hits the water.
Realizing the arc technology is dangerous he vows to change the way people think about free energy while keeping it safer from people who would abuse it. That means totally changing the arc reactor in ways that would make it impossible to recreate using existing technology. To this end he decides that he needs to rid himself of his own arc reactor and so devises a way to remove the shrapnel from his heart.
We completely drop the whole Pepper is super powered thing. That meant nothing in the greater world building so it's gone.
We replace it with Tony salvaging the Fin Fang Foom from the ocean to ensure no one can learn anything from it's secrets.
We end on Tony telling all this to Bruce.
To replace that scene as the end credit scene we open on an undisclosed A.I.M. lab and Killian is awoken, when one of the scientists asks Killian how he feels he responds "I am fine, I am M.O.D.O.K.!" and turns around as the camera pans out to see Guy Pearces big, massive head in a floating chair and as the camera pans it shows the massive science facility which is seated in a huge sphere where there a thousands of A.I.M. scientists working on mech suits and other tech with the Hydra symbol on them.
Conclusion: I think this version keeps the basic idea that they were going for while creating some building blocks. Tony still ends the movie a changed person, he still ends with all his armors gone, he still ends with no arc reactor, the whole Pepper thing started and ended so fast we won't miss that at all. But it takes A.I.M. from almost a fan service reference to a major force in the upcoming movies, hints at the return of Hydra (which is has to happen as both A.I.M. and Hydra are two of the major villain factions in the Marvel Universe). Plus we get M.O.D.O.K. It's something a little more faithful to the comics and incorporates more of the Iron Man comic universe into the movie with the addition of Fin Fang Foom. Foom wouldn't work as a kaiju style actual dragon but by making him a battleship you also keep such a fantastical concept grounded in the tech based Iron Man movie universe. If you have any ideas please share them in the comments.