Here is what I think, based on recent interviews…
Ron had this theme park twist idea early on, but it didn't make it into the game, and we ended up with a more 'normal' pirate story, though some remnants of the twist stuck around.
While finishing up MI2, Ron didn’t know how to end it. He remembered the weird theme park idea and used it in while leaving it ambiguous, not entirely sure himself what it meant.
After leaving Lucasarts, Ron thought of ways to resolve the cliffhanger, with one option being "Guybrush is actually in hell," as he mentioned on his blog. So, the whole lost child in a theme park thing wasn't true anymore; it became more about "Guybrush is in hell."
When Ron (and Dave!) finally got back to Monkey Island, they were older and realized the hell idea might not be the best. They decided to circle back to the original theme park idea, keeping what fans loved over the years – the normal pirate story, humor, and ambiguity.
Now, players get to choose what it all means. That's what makes the most sense to me.