This would explain the moratorium on "leaving town" from Hank's list that he dictated. Oh, and the cable guy who gave David and Jennifer the magical remote control? He's Hank!! Sex?! That never used to be a thing in Pleasantville. So all this bit about wieners, buns, and condiments would be the perfect stand-in for sexual purity. Also, one solid proof of Hank's existence in Pleasantville? He always sends a stork to deliver a baby to prospective parents!
The residents do seem to have some idea of a personal history, and that things will continue as they always have, which is disrupted when the kids show up. They may experience the passage of time as the running of each episode, either multiple episodes all in one night as a marathon, or one or two episodes per night in syndication, the same stories over and over again. But after all these changes, will the reruns ever be the same again?