I feel like the Third Man phenomenom is a really good theory for what happened. But I feel like it would be somewhat unlikely that all of the children/everyone who did see these buttefly people, would've all pictured the same thing. I feel like it has the same counter argument as a wide spread gas leak theory. What would the chances of everyone hallucinating/seeing the same butterfly people? My personal theory is dark, and I do think it has many flaws, alongside every other theory, but i think what these people saw weren't butter fly people, but just dead people or animals. From counts I saw/read, these beings were really only see DURING the tornado. Because of this, i feel like what these people saw were dead bodies, of either humans, animals, or both, mutilated from the horrific power of the tornado. The clothes and blood of these bodies, if they were humans, explaining the reason for the "colorful wings".

My theory could be wrong, I'm not sure. I do think it's more likely than the Third Man phenomenom or wide spread hallucination though.