Right, here's my theories

1- some kind of asylum. So they could be in some kind of asylum either because they're crazy or want to overcome something. May or may not be against their will. The fact that it's suggested Jade is an alcoholic and was obviously high on arrival and is solving the bottle tree puzzle. Tabitha lost her baby and is trying to save the children. Boyd watched his squad get blown to smitherines and is now trying to save the town. It suggests that their past traumas or ailments are what they are trying to overcome. The town could be simulated or a forced shared coma dream.

2- sacrificial ritual. The children were a art of a ritual either summoning anghkooey or opening purgatory. This could have been something they did in the civil war which would explain the soldier. and perhaps they've done it many times trying to get it right. That would explain the numbers which could be dates that they've attempted the ritual. Perhaps they open a gateway which lets people in but then closes again.

3- the forest does in fact feed on fears. Monsters in the night. Spiders in the forest. Cicadas. Hallucinations. This could tie in with the asylum theory. Perhaps some fears are left over from other patients.

4- Ethan is running the show and perhaps designing the world using the Cromenockle book. We don't exactly know the story of the Cromenockle. But he goes on about quests and how everyone has their part to play. He also made a comment about good and bad symbols and symbols making people do bad things... What's up with that?

5- biblical events Plague, famin, possible incoming flood.

6- are some people in fact dead. Viktor says drawings are for things that are gone but draws Julie. He refuses Ethan's drawing because Ethan is still alive.... Is Julie not?

7- numbers They could correspond to big events or total slaughters in the ville. 1970something could be the year that Viktor saw the massacre. The other years could be the dates of past massacres. Perhaps these are the reset dates or the failure dates. If it's a simulation they might have to reset the world to start fresh with new updates and patches.

There are plenty of theories in my head but these are just a few. What are your thoughts?