It's all in the little girl's head?
At the end of the game, the little girl escapes the witch's house and gets back home, but the witch finds her again once it's dark outside. Many of us would assume that there is only a bad ending for the game and nothing else. However, when you think about it, it's possible that the little girl only had a nightmare and that she would recall the dream's events. The two children in the basement were her children
The two cocoons in the basement could possibly be the the Hag's children. However it's unknown how or even why the Hag even turned them both into cocoons. The two slugs/cocoons in the basement were the Hag's mother and sister.
On the wall in the main room, there is a photo of a woman and two girls, all three wearing witch hats. One of the girls has her face scratched out so you can't see it, the other looks sad, and the woman's face is deformed in a similar way to the Hag, except her general attire and body type seem different enough that they are probably not the same person. There are two pictures on either side of the main one; each are a headshot of the mother and the Hag's sister. Considering that her own face is blacked out in a family photo and she never got her own headshot photo, it's possible that Hag grew up feeling very insecure of how she looked because she was ridiculed by an abusive mother, despite her sharing the same deformities. The saddened look of the Hag's sister implies that she might have felt bad about being the favorite. It's possible that the Hag got fed up with the abuse she endured and turned them both into those things in the basement, including her sister, whom she thought to be Accomplice by Inaction.- This also adds some Fridge Horror to the situation, because depending when the Hag turned them into those slug things, they might have been stuck that way for years, and considering how the girl had to kill that slug with salt in the dining room, they have no way to free themselves, including putting themselves out of their misery. Which makes it even sadder if the Hag's sister never really condoned the abuse and was a victim in some way herself.
