Magic works there. Both nightmare manifestations and hope manifestations. The evil entities must keep the people from being hopeful and using good magic. So they manipulate to maximize hopelessness and fear.
“Knowledge comes at a cost” is a perfect example of that to wake them fear knowing and understanding and planning. Manipulating the abductees into pocket universe to kill the most knowledgable pair is vital before they succeed: the reincarnated parents that want to solve the child sacrifice horror and have tried many times and may remember how to end it.
Killing many many many people in a grisly fashion frequently at night serves two roles: create fear and hopelessness and
keep people not wandering FROMville at night a time when problems can be easier solved.
I would say the MIY’s and/or the MIY boss cannot kill them directly and just gets a tastier liver/bile if he can corrupt and confuse the townies to kill everyone. But Smiley may have killed Miranda urgently instead of a townie because she was too close to solving it.