A theory I’ve seen floated around is that the ship is travelling through the seam, hence why Sam and Fragile were blue at one point. My best guess is that the puppet and all the weird monsters are connected to the seam somehow rather than someone’s beach.

With Higgs, I remember a lot of people guessing in the first trailer that he fused with or possessed Amelie somehow because of the hairdo, and I’m still rolling with that assumption.