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If you get some time read the short story on the DVD.
Here's how i think things went down.
SPOILERS!!!!! If you haven't seen the movie yet for all that is good and holy turn away now!!!
Ok, At the end(beginning) Leonard takes Jimmy's clothes and thus assumes the "John G" persona. He is aware of everything up to the abandoned site where he kills Jimmy. On the DVD, it mentions how Leonard was in an institution, and they trained him to use a journal to keep things in memory. Leonard kept two journals. One on normal stuff, and the other hid from everyone had escape plans and whatnot. Back to the abandoned site, Leonard knows he killed the guy responsible for his wife being raped, but he doesnt want to remember the fact that he killed her with insulin. He then decides to go on a neverending quest to avenge. He makes the decision to make Teddy his John G, and burns the evidence that he killed the right guy, and killed the wrong guy.
Natalie is aware that Jimmy is dead. Why she never openly admits it is a mystery. Teddy was trying to help Leonard. He didn't deserve to die. I don't know if anyone caught the flash of Leonard lying in bed with his wife where he had the tattoo on his heart that said I've Done It. Natalie used Leonard to kill Dodd just cause he was something of a pain and she wanted him dealt with. She used Leonard hitting her, and him not remembering it to her advantage.
All and all, WONDERFUL MOVIE. Must see over and over.
Oh and if you don't understand the whole thing with Leonard thinking his wife was raped and murdered, her eye was blinking when she was on the bathroom floor next to Leonard. His wife was distraught over his condition that she tried helping him and he ended up killing her out of confusion.
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"I was walking down the street with my friend and he said, "I hear music", as if there is any other way you can take it in. You're not special, that's how I receive it too. I tried to taste it but it did not work." - Mitch Hedberg