I consider it makes sense to take for granted that limbo is regarding real, that is, a part of the afterlife. Judging from the title screen after the final and the two swarms of flies, I'd say the boy and his sister died (perhaps fell off the ladder a prominent place?). For some reason, which are then separated and the child is forced to cross the limbo, with its fauna and others demon restless souls (and quite malicious) to deal with.
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