Are the townspeople the real villains?
Thinking about what we know of the town's origins and things that have been established.
We know the town's original inhabitants sacrificed their children in exchange for eternal life, doing a deal with an unidentified evil power (maybe the Man In Yellow, maybe something more sinister).
We know the anghkooey children are trying to get Jade and Tabitha to "remember", and are seemingly the manifestation of the sacrificed children.
It's clear though that there's more they want Jade and Tabitha to remember as they keep uttering the phrase to Jade (along with a past version of himself when being offered the blood skull) even after the big revelation at the end of season 3.
I was thinking about the way things appear and manifest to the townspeople, and whether everything in Fromville necessarily always takes the same appearance.
Could it be that the sacrificed children only appear to Jade and Tabitha in the form of the anghkooey children, but they also appear in another form - the monsters themselves.
We've always assumed the monsters are the descendants of the original townsfolk, and that their monstrous form is the manifestation of their eternal life.
But we also know that Jade and Tabitha reincarnate and always end up back in town, what if this is true for all of the townspeople but the rest can't remember it (this might explain Elgin's visions before arriving, or why Bakta knew the nursery rhyme).
What if the townsfolk are the reincarnations of the original inhabitants, lured back and tortured and killed life after life but always being reborn, doomed to live forever and pay penance for what they did.
The entity with which they did the deal resurrected their children and allowed them to grow older and transformed them into monsters that take joy from torturing and killing the adults that sacrificed them. (There's no need to run and kill them, as they know the cycle ends the same way every time so they might as well take it at a leisurely pace).
The anghkooey form comes out only for Jade and Tabitha to help them 'remember' purely because they know that in every cycle this helps bring the town closer to its final grim massacre.
Perhaps only the townsfolk can rebirth their children as monsters, which is why Fatima needed to give birth to Smiley. In this case the references to Fatima being his "mother" could be more literal than the show is letting on.
All of this might be way off, but I just thought it could make for a very interesting twist if in the end the people of Fromville finally figure out why they are being punished and in classic horror fashion it turns out they're the real monsters...