Manxman, there is another walkthrough
here that seems to give more directions on where to find people in this section.
From the Squid Squash booth, it says to: "keep heading down straight on the path that you're on, going around behind the man from the Squid Squash Game. Cross over the little wooden plank bridge and then go over and talk to the little boy you see lying on the ground to the left a little..."