Kudos to Ausgirl for an awesome post. You outlined a simple and believable explanation of what happened which I find totally compelling. A couple of things you said reminded me of my own experiences: how rapidly a close friendship can turn into something really unpleasant. And the incredibly dark - but not at all unusual - thoughts and deeds of kids at that age.
I think the most frightening aspect of this case is the apparent "ordinariness" of the circumstances. Everyone said they were capable students from good families, no history of criminal behavior, etc, etc. And so one thinks: "if those kids could do that, could kids here do that to my child", or "could my child do that to another kid"? And the answer, IMO, is without doubt "yes", given the appropriate unfortunate set of circumstances:
1. Psychotic behavior (losing touch with what is and isn't real) is a factor in many different mental illnesses. Perhaps the incident with MG and the mallet ("I have a weapon and I can do anything I want with it") was an early indication of this. Of course, we don't know if this led to any psychiatric evaluation/treatment, or whether it was seen to be a bizarre but isolated incident that didn't merit further action.
2. The transition from elementary (primary) education brings about huge changes in what may have been solid friendships. PL seems to be just what she should be at 12 - a child. She still enjoyed playing with her American Girl dolls (as did MG), volunteered at the animal shelter, and was in no way involved or interested in the disturbing world of Creepy Pasta and the like. I totally agree with Ausgirl's hypothesis: new cool friend comes along who shares MG's interests, and suddenly PL doesn't match up. I've seen the controlling behavior that comes of scorn or contempt, and the sadness and bewilderment of the other party who no longer makes the grade. And that person tries to make it right again, but just makes the situation (and the contempt) worse.
I think this resolves my question about "why PL"? The answer is the utter contempt that kids that age can show toward one another. It wouldn't be a problem to kill her because she was "lame" so it didn't matter. A horrific prior example of this kind of cruelty was seen in the murder of 12 year-old Shanda Sharer by 4 girls aged 15 - 17. This was an act that was the epitome of appalling. The perpetrators said it was "pure peer pressure".
This WAS bullying. MG was taunting PL online only 4 weeks before the attack, mocking her love of Katy Perry, and calling her "mainstream". The kind of cruelty we're talking about here would have no problem with the duplicity of inviting the victim to a sleepover expressly to kill her, or pretending they were going to get help after the stabbing.
3. The toxic friendship. Again, Ausgirl nailed this I think, sadly from her own experiences within her family. AW apparently went elsewhere to elementary school, and was starting a Middle School in which she may have had no existing friends. She would have seen MG daily on the school bus, as they lived in the same townhouse complex. There were a number of negative events in her recent past (which I won't enumerate here), which would very likely have made her escape into the virtual world to escape the real one. I can only imagine that her friendship with MG, who not only shared her interests, but also lived a few yards away, may have seemed incredibly important.
There was a clue to the dynamic between the girls right before the stabbing, when MG said "I'm not going to until you tell me to...". At first, I thought this was an attempt to offload some of the blame, but now I think it was because MG knew it was wrong and needed the "push" from AW.
4. The game that went too far. AW - obviously - should have spoken to someone immediately about MG's suggestion that they kill PL. She must have seen how important this was to MG, although I'll bet she didn't REALLY think it would ever happen. But she would (and did) do anything to preserve/strengthen their friendship. She must have believed that telling someone about MG's suggestion would be the end of their friendship... and maybe MG wasn't serious. But she probably didn't know at that point that MG was mentally unstable and REALLY was serious. And so it continued with MG believing it to be a real plan and AW not having the strength to end it. This secret planning became the core of their friendship, and maybe that's why there was no thought of "later"... the plan would be done with. What would hold them together? And if the plan wasn't real - did that mean the friendship wasn't real either?
5. They are NOT adults. If they had been... this would not have happened. This is the supreme irony in trying them as adults: they are being tried as adults for a crime that adults in as similar as they could be circumstances would not have committed. This isn't an adult crime - it's a child crime!
I think that MG really did believe Slender Man to be real. PL certainly thought she did in a conversation with her mother "...MG knows he is real...". I also think there must have been a grandiose aspect to her symptoms - she had exclusive connections with various characters that others did not have... and she was not bound by the same rules. Her classmates commented on her aloofness in a NY Times article. I think that her symptoms must have been greatly exacerbated by the contemplation of what she was planning. Living in a mythical world freed her of the boundaries of the real one, and provided a feeling of great power.
There is no one clear "reason" that this happened, but a series of contributing factors. None of them are exclusive to these two girls. This is a contentious proposition, because it means that unlikely though it is, the same thing could happen again... without the adults involved recognizing the signs before its too late. And that's not what people want to believe.