So, Here's some thoughts/ideas I had after reading the new plot-idea.

The Schism should be shadow pokemon
Just an idea, Shadow pokemon are supposedly evil or at least artificially Bad pokemon. It gives a good premise as to how the dictator keeps in power, because instead Killing off people they don't like, they can turn them into shadow pokemon who a essentially brainwashed puppets. Plues helps that shadow moves (onle usable by shadow pokemon) are always super effective against non-shadow pokemon. Also their sheer numbers suppresses the idea of purifying the shadow pokemon, making any "white knight" pokemon look hopelessly outmatched and pathetic. Possibly the dictator himself is XD001, but I would lean more toward having them not be a legendary.

Limit Plate powers to contact
I wasn't entirely sure by how you described it, but to be safe I think the plate's powers (changing type/using any move of that type) should only be usable when a pokemon is holding/wearing the plate. The way you said the "type changing stays for as long as the older wants" I wasn't sure if this would also last After they put the plate down or some similar action of no longer directly holding it. From my prior experience, plate abilities are often OP, but I think the limitation of having to have it on your person would help limit these, since an enemy managing somehow to make you lose/drop the plate can become a major liability in a battle.

More on plates, (for details) would you still be able to use your original type moves? For instance if a typhlosion had a water plate and changed type, could they still use fire type moves while he is a water type via the plate? Or would it be a "They can change back and forth" kind of thing?

A plot line Idea
This is mostly the way I organized the various ideas together into a plot-line:

You are in the PMD world of (insert name here), ruled by a dictatorship of shadow pokemon called the Schism. Their rule is absolute, and to go against them is considered futile.

The dictator has recently announced a grand event Known as the Tempest festival. An olympic-like tournament of bloody to-the-death battles, High risk land,sea,and air racing, Extreme endurance challenges, and similar dark and deadly competitions. Of course, as it is hosted by the government, the tournament is mostly rigged to allow the dictator's personal representative athlete shadow pokemon to win. However that doesn't stop other pokemon, supported by secret under ground factions (the teams) to join in a rare chance for a sliver of hope to take down the schism.

What is this hope? The hope is the grand prize of the festival: The master plate. Recently uncovered in an ancient relic sight, the dictator wants to take the opportunity to remind those who think to oppose him that it is futile, as after one of his warriors wins the festival they will present it as a "gift" to the true master: the dictator.

the factions know two things: If the dictator controls the master plate he will be unstoppable. And second, if one their faction gets the master plate, they may have for the first time a real chance to take down the schism. Each faction has, over many years, managed to acquire a few of the other normal arceus plates, which allow the holder to change type and use any move of that type. However even with a few of these plates they don't have enough power to face the entirety of the Schism. And this lies in the fact that the Factions are separate and relatively distrusting of each other in these dark and dangerous times. Each is worried the other will become just another version of the schism, only trusting themselves to bring peace to the devastated land. If all factions had combined forces and their various plates, they could probably do it, but the Schism's ability to spread fear and distrust is great and keeps any resistance broken.

Now here's the plot twist: At first the festival goes off as normal. The rigged stuff rigs things in favor of the shadow schism warriors. Then, part way through the festival, the "unknown attacker" strikes and the master plate is stolen, leaving only a message to keep the festival going until a winner is decided. It's clear by the Dictator's reaction (lashing out violently at other competitors to kill them and starting a crazed, death filled man-hunt for the thief) that this wasn't a ploy by the dictator in case the shadow warriors didn't actually win. This leads to a horrible nightmare of a game where the factions must simultaneously attempt to find the plate first (something near impossible considering the schism searchers greatly outnumber them, and the faction has to stay undetected) while at the same time trying to win the festival.

The important thing, which stays secret to the players, is that the "unknown attacker" is in fact Arceus. Arceus had decided that the world had become too evil and was due for destruction, but with the recovery of the master plate Arceus decided to give one last chance. If one of the factions managed to beat the schism in the festival, proving themselves worthy, he would give them the master plate, as well as a way to purify Shadow pokemon, in order to defeat the schism.

While each faction/team has plates, I don't think its necessary to make sure All the different plates are given out. Preferably each team would only have 2-3, but to keep it fair it might be better to have each entrant have their own plate.

So... what do you guys think?