Here's a hot take:
What if this was all a "movie" and you were co-starring alongside Megan. Think of it as "based on true events", minus the fourth degree burns and all that. After the movie is over, you'll get a flashback of what really happened during the fire (both girls survived).
This is the only way the dev can backtrack on all of the death stuff.
There's plenty of possibilities in that vein, but they all pretty much boil down to "The 'Dallas' plot." Which was "It was all a dream. Ooooooooohhhhh..."
Even if it doesn't literally turn out to be a dream, the idea of the events we've just seen play out turning out to be something that "didn't really happen" in the game's own universe... well, there's a reason why Dallas is kind of famous/infamous. Did the reveal that an entire season turning out to be "just a dream" catch a lot of people by surprise? It did. Was it highly talked about because of that? Sure. And I imagine some people raved about it, claiming this was a masterpiece of prime time television because "Dear Lord, who EVER could have seen this coming?!"
It also became infamous - to the point - where it's heavily parodied today as a prime example of something that is so over the top ridiculous as to be laughable. Why? Because setting up a whole ton of development (for your characters, for your setting, etc.) only to then go "But it's all bullshit because none of it ever 'really' happened" is, at best, kind of wasteful, and at worst, kind of spitting in the faces of your own project and the people who follow it.
So, sure, if PinkCake wants to go that route, if he always planned to go that route, it's his project. I'm not going to try and tell him he can't do what he wants with his own project. But I don't think I'd be the only one kind of facepalming and going "So, you did all that work only to go 'PSYCH!'" at the end? Dude, why?"