Continuity mistake: After Neo has been blinded, his eyes and everything around them is burned and red. Right after the fight, when Trinity sees him blind for the first time, his eyes (or eyelids) are grey, and only the rest is red. (00:56:55 - 00:57:40)
Continuity mistake: In the final fight between Neo and Smith, when Smith throws Neo inside a building, he flies inside the building through the hole. When Smith is inside, his flight causes a lot of dust. In subsequent shots, the dust has settled in only a few seconds.
Continuity mistake: When Smith, in the flesh, has Trinity with a knife at her throat, one scene has a blood mark on her neck. The next scene, a moment later, shows the blood mark gone. (00:53:04)
Continuity mistake: When Smith is finally destroyed there is a wide shot and a close shot of the Oracle lying in the water filled crater. In the wide shot, there is a lot more water; her arm is completely underwater and so is half her face. In the close up, her head is almost entirely above water and her arm is visible. (01:55:00)
Answer: Neo was the One. Prophecy is not always 100% correct on all the details. And he did destroy the illusion of the Matrix and granted freedom to those who desired it. So he did end up fulfilling the prophecy in a way. It's much like Anakin Skywalker bringing "balance to the force" by annhilating the Jedi and allowing a new order to spring forth. Not exactly what you would expect.
Grumpy Scot