The plot is insanely difficult.
When the jet engine crashed in Donnie's room a time loop was created. A parallel history became to exist. A co-universe if you will. The problem apparently is that there's no room for two universes. One of them has to go in order to let the other one exist.
Now you also see in the movie you can travel through time. That's exactly what the jet engine, which falls off the plane Donnie's mother is in, does. The way I see it, Donnie argues that, now his girlfriend is dead in this universe, it's better to kill himself by walking into his home, where the jet engine will crash. They say Donnie knew his universe would stop there, because the fact he lived on after the jet engine crashed, is what was wrong with his universe in the first place. The time loop comes to an end.
