The Nintendo Power Final Fantasy Treasure Quest was announced in the September-October 1990 issue of Nintendo Power. The winner was to go to an island and look for treasure while actors would pretend to be pirates. Monkey Island is no different. The first Monkey Island makes it clear that the three treasures are something that everyone can do, but the current participant is treated as if they are the only one going after the three treasures, as if they are somehow special or the chosen one, despite the evidence of multiple t-shirts given as prizes. These t-shirts are a cheap way to give recognition that one has accomplished their quest, but are not unique treasures in the typical sense of a lost treasure. They are like carnival prizes showing off that one has completed a task. The pirates involved in insult swordfighting are players looking for the shirts, or are actors pretending to be looking for the shirts. In one instance, a pirate breaks character and tells Guybrush to play along, since everyone used to talk like a pirate back then.
Melee Island is the main part of the attraction, the central hub. Those involved in the quest chain are all actors playing their roles. The store owner keeps going back to find the sword master. The sword fights never become violent. The cannibals never eat anyone. The player is supposed to win the contests. The troll is an actor wearing a costume. The ship doesn't travel to Monkey Island, the ship goes through a mysterious fog and appears at Monkey Island on the other side of the fog, the fog obscuring the distance to the island like some sort of ride.
Maintaining this elaborate illusion requires restocking regularly on supplies. The supplies are from the "Employees Only" room in Melee Island. After the Grog machine is damaged in Monkey Island 1, it gets sent to the storage room for repairs. The boxes of Grog show this is a professional operation, and not as haphazard as the outside setting would suggest. At some point, everyone has to end their role, take off their costume, and go back to their lives. Unless they didn't want to. Unless they chose not to. Unless there was a way to stay without returning to the real world. Because someone liked the amusement park more than everyone.
Dinky Island is right next to Monkey Island on the map, but is within walking distance to Melee Island. The map, like an amusement park, is only meant to show the participant the fictional nature of the presentation, while the real distances could be different. The scale of the park and the buildings could be skewed with a reduced scale and forced perspective, just like in Disneyland, to give the impression of a larger area by using smaller scale buildings. The clock on Melee Island was never meant to move. Other players move through the fake buildings, knowing they aren't real.
Guybrush liked the park so much he decided to stay. His brother was sent by their parents to find him, but first, his brother had to adopt a role. He adopted the role of the sheriff to keep the storage room secure, because Guybrush may have wandered in there when he wasn't supposed to, hoping it was part of the attraction. And the other role was the dread pirate LeChuck, who seemed to be an appropriate role to hunt down someone who believed they were the hero.
Just like the traffic cones could be placed in front of the storage room to keep people out, maybe Dinky Island wasn't complete. Intended as a second Monkey Island, this part of the park was being renovated with custom landscaping to resemble dinosaurs and whatnot. There was even a help line in case someone got lost. Guybrush got lost, because this area of the park wasn't open yet. LeChuck had to find him, because he was outside of the game, and it was his responsibility to locate his lost brother. Guybrush had enjoyed hiding in the forbidden areas where only employees were allowed, and had found a way to stay in the park indefinitely. Guybrush had found the E-Ticket.
The E-Ticket allowed Guybrush to repeatedly participate in all the attractions without having to leave. If he lost the E-ticket, he knew where to find more. Big Whoop was just part of the lore that was to be implemented in a new attraction once Dinky Island opened, but Guybrush told himself the E-Ticket was the real treasure, and stole it, to replace the E-ticket his parents gave to him when he first entered the park.
Guybrush stayed in the park for at least seven years. His parents were worried that he would never come back. They were old, and couldn't wait, so they sent his brother he find him. The wanted poster was part of the ploy to capture Guybrush and get him out of the park, while appearing to be part of the game. Not wanting to be forced out, Guybrush kept going to the supply room. He made a hideout there, and on his way to get another E-Ticket, Elaine just happened to find him. So he had to tell his story, but this was a cover story for his secret of having unlimited access to the park and access to the still under renovation and employees only areas.
The Phatt City library gives some piecemeal hints as to the components of the park. Walt Whimsy was the creator, he was skilled in animatronics and created a series of attractions. "Hip Lingo for Pirates" was a manual for staying in character. The other books were to maintain the tone of the pirate setting, provide lore on the other character roles, or pass the time while waiting for the next attraction. "X Never Marks the Spot" was a warning to stay away from the X on Dinky Island, because it wasn't complete, and lead to the still under construction areas.
Why did Guybrush revert to his earlier age when he left the park? Because the park is in a Narnia sort of stasis, where growing old in the park is possible, while it appears no time has passed when returning to the real world. Guybrush's age is the same when he entered and left the park.
Why would all that voodoo magic work? Because the voodoo magic is real. The park runs on voodoo magic. At some point, Walt Whimsy wasn't satisfied with animatronics and consulted the voodoo lady to add voodoo magic to the park to have a competitive advantage over any other park. He was turned into a dog. But the magic was real. The magic was always real.
The pieces of eight aren't the real currency. Everyone is paid in grog to keep the show running. Guybrush is The Teetotaler, and makes better decisions than the actors who are too affected by long term alcohol consumption and whatever odd ingredients are in the stuff. The actors are too content to play their roles as long as they get free drinks, as it helps them get in character, with the side effect of lethargy, halitosis, and complacency.
In a world where the East India Trading company was replaced by a company that distributed Grog instead of tea, the Grog influenced citizens managed to create a settlement somewhere in the Caribbean. Maybe the Grog company wasn't particularly evil, but made some sort of trade deal to keep the area as it is without being attacked, in exchange for a steady supply of Grog. The citizens were encouraged to use the word Grog in conversation as a form of word of mouth advertising. The plethora of advertising and trademarks carried on this tradition with other companies. This business relationship kept the island areas running as a perpetual carnival and theme park.
The skeletons dancing to "Dem Bones" are there to give a clue to navigating LeChuck's castle, while the skeletons in the tunnel are conveying the message that Guybrush's parents are metaphorically dead from waiting for Guybrush. Guybrush's parents can send these messages to Guybrush in the simulation to remind Guybrush to wake up from the simulation/virtual reality and return to the real world.
The Voodoo Lady tells Guybrush that the treasure of Big Whoop contains "the secret to another world. Find that world and you'll be able to escape LeChuck forever." Inside the chest is just the E-Ticket, but in fact opening the chest changed reality so that the events of the first two games were just a kid playing make believe in a theme park. This is the world where Guybrush can escape LeChuck, as a child in the modern world.
However, LeChuck somehow found a way to "hitch a ride" to the other world, by getting himself to become part of the altered reality as Guybrush's brother Chuckie. Maybe the new reality was being created by Guybrush's mind, so getting Guybrush to believe that LeChuck was his brother meant that got written into the new history.
