He becomes unbound to Mundus, and begins to eat the world
Yes, myths in TES tend to be, more or less, literal.
Alduin consuming the world, I have down pat; It's the implications that make my head spin, but they may be based off of a faulty interpretation.
Alduin consumes the Kalpa; as I understand it, this necessarily includes Mundus proper, but this is where things get hairy for me: Is Mundus a structure which confines the Aedra (a prison) or is it comprised of the (remnants of?) the Aedra (the gods as impressions in the skin-ball) or is it both? Or am I completely missing the mark, because if the world being consumed is equivalent to the other Aedra/pieces of the Aedra, then Alduin/Auri el is devouring his kin?
The dragon god of Time -literally- devouring Love, Mercy, and Mortality (among others) just drives the horror home for me.