[spoiler alert] I think the intended interpretation is that Owen is trans. Whether or not Maddie was real, died, actually came back, or anything about the show, i think is up for interpretation. I think your interpretation of her dying and Owen making up rest of the narrative I think could still fit with the trans identity narrative. It's not one I've heard, and I find it quite fascinating. I think the most literal straightforward answer is that, indeed, both kids are from the show, and the villain cast them out into what they think is the real world. That's probably the horror/creepypasta interpretation. However, there definitely is a lot of ways you could interpret many parts of it to be metaphorical rather than literal.