I sure would've liked to see the walls of the castle tumbling down while the earth rocked and thunder above ! :)

I took this to signify the rule of Manfred's family had never rested on strong foundations. Outwardly, Manfred may've appeared a strong ruler but inwardly the foundations of his rule were weak and unstable.

I think the real owner, Alfonso could not ascend to his heavenly rest until his line was restored to Otranto.
Theodore was pronounced as true heir by the vision so he is prince by divine right.

Theodore is revealed to be the grandson of Alfonso the Good.

Manfred confesses the crime of his grandfather Ricardo and the fictious will--so perhaps Manfred was never meant to be ruler of Otranto.
With the slaying of Matilda in a consecrated place, he feels doomed by heaven. Everyone has witnessed his misdeeds and guilt.
Perhaps the idea is, a prince who is outcast by heaven cannot rule over other men so Manfred resigns the principality.

Possibly, HW drew on English hisotry to write Otranto, firt passed as an exotic tale from C12th Italy.
When Henry the Eighth was excommunicated, the Pope declared he was deprived of his kingdom and his subjects freed from obeying him.

There is a Castel Otranto in Spain which has a turrent like HW's home Strawberry Hill. Reduced to a crumbly ruin now !

See www.castellpuglia.org for picture of Castle Otranto.

Interestingly, it was built by King Ferdinand with his wife, Queen Isabella in the C 15th. Their daughter, the saintly Catherine of Aragon had a dispensation to marry Henry VIII. Delicious coincidence !