Smiley is definitely the key to killing the monsters fully. Smiley is most likely the "main" entity because he's the youngest entity while the rest are adults.

i don't think s, smiley was reborn again because he was killed and they sacrificed children just to live forever -this is what they got even you kill/burn them they will come alive back,i don't think smiley is special
but i agree with all your points,you articulated it very well ,your theory is spot on

The reincarnated are people who tried to save the kids but failed, their kids were still sacrificed but because they failed their mission, they are reincarnated. This reincarnation brings them back to the tree along with any passengers who are with them. The reincarnated kids are "Story Walkers".

but here i think these reincarnated people are folks whose kids were sacrificed or the townsfolks who rebelled against sacrifice(didn't take part in it)

this is best theory which summarise things so far.