You guys have come up with some good theories! I still say Sega messed up, but I'll toss one out that applies to the games.
Assuming Elsydeon was created after the PSII era, the first Lutz was Noah, (translation
) and the sword was created by Espers, perhaps Lutz's memory and the Telepathy Ball come into play. Noah/Lutz only joined Alis after Nero's death, so he never met him, and therefore Nero isn't remembered as a protector of Algo. Of course, this requires Lutz to have met Nei, but we know from PSII that Lutz
interfered in Rolf's past to save Rolf's life, so perhaps he always kept an eye on Rolf's life to make sure his chosen Protector survived, and was aware of Nei because of it?
That's a bit of an elastic theory!