I've read through all these theories and they're quite interesting. I still really think that Nero was just some orphan kid that Credo and Kyrie took in and hence grew up to be a part of the Holy Knights within The Order of the Sword. But having said that... Capcom left a lot of doors open by giving the usual "he's an orphan" story. So in DMC5 they really could make it out that he's the product of Sparda's bit on the side or something. But anyway yeah, back to what I believe. I believe he was just a regular guy who grew up with Credo and Kytie and therefore developed a very deep relationship with Kyrie as stated and shown in DMC4. I personally think that his love for her was so great he willingly went out to search for the means to protect her should the situation arise. If you look back in the cutscene where Nero activates his Devil Trigger/restores Yamato in DMC4, he goes on a sort of small speech, saying this; "From that day forth... my arm changed... and a voice echoed... 'Power... Give me more power!'. And if I become a demon, so be it... I will endure the exile... anything to protect her." Okay, this for me indicates that Nero IS connected to Vergil. I personally believe that Capcom are revving up Vergil's return and that they needed a way to throw it all together, and hence Nero, and hence his orphan story. Nero, I think, is the centre point to which the entire Vergil returning revolves and unfolds. Okay, so looking back at the speech. To me, it seems that because of his love for Kyrie, Nero went out to find the means to protect her if the situation should arise, like I stated. I think that along his search he came across the festering soul of Nelo Angelo. Now considering Nelo Angelo is Vergil as we all know, I think he'd be pretty annoyed at Dante because Dante "killed" him in DMC, so obviously, he's gonna want some way to get back at Dante and probably want to take over the world like he tried to do with the Temen-ni-gru. Continuing -- I think Nelo Angelo saw Nero as a chance, a possibility to do what he really wanted, so I think that he sensed the love Nero had for Kyrie, realised he could use it to his advantage and offered Nero the power of a demon ("And if I become a demon, so be it..."), with Nero obviously accepting ("Anything to protect her."). Therefore, I think that Nelo Angelo gave Nero the Devil Bringer, while imbuing himself within it, causing demonic blood to course through Nero's veins, which would in turn over time allow Vergil to make a come back. I'm not saying how or when but I think it's very plausable, considering that Nero said in his speech; "And a voice echoed... 'Power... Give me more power!'" The whole "power, give me more power" was like Vergil's catchphrase wasn't it? And like we all know, he embraced the power of Sparda and wanted more. So... yeah. All the theories I've read about Nero's identity are great, but I think the one thing you guys miss out is the fact that Nero would do anything for Kyrie.
More "evidence" for Nero "containing" Vergil;
In their first fight, Dante said to Nero something about them being the same, yet Nero being different to the other Holy Knights (who had been demonised or whatever through the Ascension Ceremony). I don't think this means that Nero's Dante's kid or whatever. I think it means that Dante "senses" Vergil within Nero and is referring to the intention or power level. Now I know that the Holy Knights are imbued with pieces of Nelo Angelo or something to that effect, but I don't think he was on about what they actually WERE. I think that Dante meant either Vergil being much more potent within Nero, hence more powerful. But it's cloudy to really say what I mean. I know what I mean but can't describe it.
Okay, and finally for the Sanctus thing where the old man refers to Nero having the blood of Sparda on four or so occasions I believe. I think that he didn't mean Nero was a demon because in Nero's speech he says; "And if I become a demon, so be it..." So yeah. To me that automatically rules out any demonic birth right Nero supposedly has. I think Sanctus was referring to the demonic blood imbued within Nero via Vergil's possible presence in Nero's Devil Bringer. And, of course, Vergil definitely possesses Sparda's blood. Oh! And more points. Like many have pointed out; the figure behind Nero when in DT mode looks like Nelo Angelo, and when Nero's DT activated for the first time, it would have "awakened" Vergil, made him more potent sort of thing, so that's why I think Nero was able to restore Yamato, considering the deep, unbreakable connection between Vergil and Yamato.
Plus, I also think that the huge similarity between the names Nero and Nelo isn't just a coincidence. I really think Capcom are going somewhere with this.
But that's just what I think. For all we know, Nero could be Trish's second cousin's uncle's son's best friend's newspaper boy's brother. xD Capcom have so many doors open with Nero that it's possible to go in a lot of directions. I just firmly believe that Nero is the hinge upon which "Vergil's return" swings and that he's basically a plot device.