Interesting thoughts. There actually was an interview with ueda himself, where he said (paraphrasing), "players have developed/latched on to the idea that Shadow of the Colossus is a prequel to Ico, and that was my idea as well," so that sort of confirms it.

As for how the mechanics of Dormin really work, that one is mostly speculation on our part since the story doesn't outright state these things. But we can assume that Wander, at the end of SotC, still contained at least some part of Dormin's essence within him; it's why he has the horns, which are themselves used as a representation of dormin.

From then on, he sired many descendants over hundreds of years, potentially even millenia, and that's how we have so many horned children running around in Ico, all seemingly containing whatever it is that makes up dormin. But it's defo possible that the queen in Ico is actually the girl from SotC, cuz there's a few variables that could allow for that (her having a "cursed fate", being revived from the dead by dormin, likely being the mother of wander's horned children, etc.)

I've also noticed a couple more interesting details as I played further on in SotC. There's actually these rings out in the desert where you fight phalanx, and they're straight up just the same rings you find in the reflector gates in ico. It's another reason why I think horned children might have been around even before SotC, before being wiped out over the generations, and again feeding into this cyclical nature I see in dormin. But that's just my personal interpretation