FESTERS PLACE

The RED Spy didn't kill the BLU Scout in Meet The Spy
He knocked him out and stuffed him in a closet. After all, it would make his relationship with BLU Scout's mother awkward, and he does have a genuine affection for her.

* Unlikely; after killing the Engineer and walking into the "always keep this door closed" room, he fired another shot...
* Which could have been fired at Demoman or Pyro.
* Probably the Demo (no way he'd have done so well if one of those cloak-revealing bastards were present)
* Consider this: Meet the Spy and Meet the Sniper happened together in the same 'episode'. The RED Sniper killed the BLU Scout offscreen, allowing the RED Spy to take his place.
o Makes sense, except for one thing - if the BLU Soldier shot the BLU Spy, then how could the RED Sniper have backstabbed him?
o Dead ringer. Both times.

The characters are all timelords
After all doesn't The Soldier, The Scout, The Sniper etc. sound like the sort of names Timelord might have. Perhaps the fighting is part of a Gallifreyan facility (run by The Warchief) to study regeneration in more detail.
Which also explains the different character models in both TFC and the TF2 trailers.
Also, the rockets all throughout the maps are TARDI Ses, as are the Intel Cases. However, each team has the other's TARDIS, and their own key.

The battle is a meaningless war set up by an anti-male organization to eradicate the male gender.
Playable characters are all male, and they are commanded by a mysterious female voice who directs both the red AND the blu teams. The bomb is a dud, and the intelligence is a backpack full of blank paper. What other reason for warfare is there? Additionally, there is a pinup poster in a few of the valve startpoints, suggesting limited or no female contact, as well as fake cows, all to create the allure of a genuine battlezone. What other reason could there be? Think about it!