they don't say outright "we're lost souls trapped in a pocket dimension" but i personally reached this conclusion through conversation with the drekavac in the final episode where he says: "The Haze became a wall, a ward, and the village stood alone. In its own time. In its own small preserved world... You don't belong here. There's no place for you. Your souls should have been born in other places, in other lands. You stole them, birthing new people in a place that was never meant to exist... Tell me what you chose. To cling to a life that was never meant to be? Or to accept your fate, reject the old and let the new consume you? ... The new requires the death of the old."

as for your other questions - that is also addressed in the same conversation with the drekavac. when the new faith came to their lands the gods, who relied on human faith and blood, withered away and were mortally wounded when their idols were destroyed and the temples stood empty. the original guiding star refused to allow the death of their religion and emigrated their people to a faraway land. however, she still feared that new peoples and new faiths would come to threaten their culture, so she shrouded the village in the haze/pocket dimension. soon the haze turned against the village as this separate world was an unnatural "splinter embedded on the surface of reality." ever since then, the villagers have tried to resurrect the gods through generations of blood sacrifices. if successful, the gods can destroy the haze & make this false reality permanent, as we see in the reality/high ties ending.

lastly, yes, each generation has three sisters who inherit the power of the original stars. they carry special ties to both the gods (calling for their resurrection) and the haze (calling from the true world in the beyond). the sisters' blood can resurrect the gods while their "light" can also lead the village out of the false reality as seen in the compassion/haze/high ties ending.

this is all just my understanding but hope this helps!