My theory, which I think makes a lot of sense, is about what is really going on here. I believe the whole situation is based on an unfinished ritual. As we have already learned, the ritual involves sacrificing children in order to gain immortality.
The problem, however, is that the ritual was never completed. Because of that, reincarnations keep being pulled back into this place. The very first versions of Tabitha and Jade were the ones who refused to go along with the ritual because they did not agree to sacrifice their child. Because of that, the ritual could not be completed. They tried to save the child, but the child was ultimately taken anyway.
As a result, everyone ended up trapped in some kind of pocket universe. The only way for anyone to escape is if the ritual is finally completed. The immortality aspect is still a bit unclear and it may simply be about completing the ritual itself.
Each cycle and each massacre seems to happen because the townspeople eventually come to the realization that they need to sacrifice a child in order to be free. In the previous cycle, that child was Victor. That is why Miranda hid him because she was not willing to sacrifice her own child. This is also why Christopher did not believe any of it because he could not accept that the way out required sacrificing a child.
In the current cycle, that child is Ethan. It is very likely that toward the end the townspeople will be completely divided by this realization. Either they sacrifice Ethan or they refuse and remain trapped forever.
That is essentially how these cycles work. The Anghkooey children are those who were part of the ritual, but because it was never completed their spirits are still present in this place. That is also why there seem to be both good and evil forces at play.