In the final level (warning, partial solution follows), after you begin rewinding time and slowly progressing back to the beginning of the level, the events that play out look as though the princess is not only trying to escape from you but also to kill you. Twice, in her "reversed" state, she activates switches that lower or block off ladders that you could have used to climb up to where she is, given a moment more. As you chase her farther and farther out from her house, you narrowly avoid her dropping a chandelier on your head, and at one point she drops the platform you're standing on into a fiery spike pit.
Also note that before this, chandeliers were associated with the "boss" monsters at the ends of two worlds. This only reinforces the revelation that Tim was the monster all along.
During this sequence, releasing the rewind button does not restore control to the character. You're forced to watch the consequences of your actions.
One of the books said that Tim "unmade" mistakes he made with the Princess so they wouldn't touch her. Think about this for a second. It must mean that he reversed time to change something to make the mistake NOT happen in the first place. While this seems kind of sweet, it could also be horribly abused by someone, maybe even Tim. Imagine if someone who was in the military has it and that person has PTSD. It is fairly common for a guy like to have occasional freakouts. Some of these freakouts involve violence. A guy can beat his wife to near death and then reverse time. Tim says that he still learns from his mistakes and tries not to repeat them, but in the wrong hands or maybe given enough time, this power can abused. People can become disassociated with the world and the people in it and start treating it like a videogame. Feel angry? Go kill some people then reverse time. Horny? Go molest or even rape someone and reverse time. Sure the crimes never HAPPENED to the people since time was reversed, but the person who committed still remembers it. In addition, if you do use the time device responsibly, you are still going to screw up eventually. You will say things that you weren't supposed to know yet and if the other person doesn't say anything, you just creeped them the hell out and won't know it. You wouldn't know when to reverse time to to stop THAT mistake. On the other, if the other person KNOWS you had a time travel device, then they will get paranoid as hell. Look of anger on your face? "Did he just attack me and reverse time?" Big grin on his face? "Did he just grope me and reverse time?" You could've been murdered a hundred times in one day and not even know it happened. Remember, you can bring the goombas back to life. That's a bit more than a little creepy.