"Godzilla vs. Megaguirus" was made in 2000, a year after "Godzilla 2000" (1999), but it doesn't refer to the events of the previous film. On the contrary, it contradicts them. We hear in the narrative that Godzilla has visited the Japanese mainland three times, in 1954, 1966 and 1996. The 1954 occurrence refers to the events of the first Godzilla film, in which Godzilla destroyed Tokyo. We're given the additional information that the destruction of Tokyo led to Osaka being made the new capital of Japan.
As far as I can tell, the 1966 and 1996 occurrences weren't shown in any of the preceding Godzilla films. In 1966 Godzilla destroyed the Tokai nuclear power plant shortly after it became operational, causing a major environmental disaster. It was determined that Godzilla was attracted by nuclear power, so the Japanese government decided not to build any more nuclear power plants and rely on clean energy, water and wind power. This seems to be an environmental message made by the film's director and/or screenwriter. Tokai was indeed Japan's first nuclear power station, built in 1966, the first of 22 nuclear power stations, but nuclear power was already very unpopular in Japan in 2000, more than in other countries. Frequent earthquakes make nuclear power plants risky in Japan.
In 1996 a plasma power plant was built in Osaka. This was a cleaner form of energy than nuclear power, but it also attracted Godzilla, luring him to Osaka, where he destroyed most of the city. In recent years there has been research into plasma power, but I don't know if it's the same power source that's referred to in the film. I assume that the plasma power in the alternative Japanese universe is a different, completely fictional type of power. Nevertheless, this meant that Tokyo was made the capital again.
Now to the film itself. Despite five years of peace -- it's now the year 2001 -- the Japanese government has decided that enough is enough. They can't live in fear of creating new technologies because Godzilla might wade in from the sea and destroy everything. Godzilla must be destroyed. So far he seems to be indestructible, because he has a hard skin that regenerates as quickly as it's damaged, so a revolutionary new weapon has been invented: a black hole cannon. It fires a black hole at its target which swallows everything in the vicinity, after which the black hole (hopefully) disappears. For some reason nobody in the film worries about creating black holes in Japan. It's the most normal thing in the world.
The film also has a human element. A young boy is due to move from the countryside to Tokyo. He goes to visit his old school one last time, but it's been chosen as a target for the first test of the black hole cannon. He watches as the school and the ground beneath is sucked into nothingness. The black hole closes, so the test is considered a success. The boy is discovered, so he has to promise not to tell anyone what he's seen. The next day the army has left, so the boy goes back for another look. The black hole re-opens, a giant dragonfly flies out and lays an egg, then flies back into the black hole, which closes again. An unstable black hole in the Japanese countryside which the army hasn't even noticed? No wonder Japan lost the war!
The boy takes the egg with him to Tokyo. When it starts seeping water he throws it into the sewer. Underwater the egg breaks up into hundreds of smaller eggs, and flying creatures called Meganula hatch. They quickly procreate, and within days thousands of Meganula are flying around Tokyo eating people.
The Meganula are a civilised matriarchal society. They have a Queen, a giant creature called a Megaguiris, that they faithfully serve. She's too weak to emerge from the sewers, so they need to find an energy source to revive her. There are no nuclear power plants in Japan, so what's the biggest energy source? Godzilla. The Japanese army has lured Godzilla to the Island of Kagajima to be attacked by the black hole cannon, so the Meganula swarm across the sea to attack him. Individually they're no match for him, but many of them bite him and feed on his energy. Then the black hole cannon is fired. Bam! Most of the island is destroyed, and mountains disappear, but Godzilla is still there.
The surviving Meganula fly back to Tokyo to revive their Queen. Godzilla follows them. He encounters the Megaguirus, who is even larger than he is, and a fight ensues. The army looks on and decides that there's only one reasonable course of action: the black hole cannon has to be fired again. So now they want to open a black hole in the middle of Japan? And I thought I was crazy!
In my opinion, this is a classic Godzilla film. It's illogical and at times ridiculous, but it has an irresistible charm. Godzilla is in his element when he's fighting with other giant creatures. It's what he likes doing most. He's a hero who saves the world again and again. Of course, he destroys Japanese buildings and kills hundreds of people, but everyone has their faults. This is a brilliant film, far better than "Godzilla 2000".
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