I always thought that the old lady was Melissa's mother...
I've seen this movie a bunch of times but it wasn't until tonight that I caught the part where she said that Melissa's mom was her sister.
I always thought that my theory made perfect sense. My theory was:
Melissa is killed. Her mother ATTEMPTS suicide, but does not succeed, and spends the next decade alone in that house by the cliff, which would explain why Melissa couldn't find her---because Melissa was dead and she was still alive. I assumed that, grief-stricken and alone, her mother cared not about her appearance and upkeep, and over the next ten years transformed into the old, weathered looking woman who Frankie encountered in the house, and who saved Frankie from Phil. She is finally strangled by Phil, who, by killing her, actually "releases" her tormented spirit to finally be with Melissa, and the ghost that we saw embracing Melissa at the end was younger and prettier than the old woman because it was her spirit, and her spirit had died ten years before, when Melissa died.
My original interpretation of what happened actually seems sadder and more tragic---the thought of a ghost child thinking that she cannot find her mother, because she doesn't realize that her and her mother are actually on different planes of existence; that she is dead and her mother is still alive.
Quite honestly, I think that my version actually makes more sense. They never explained WHY Melissa was unable to find her mother. I mean, they both died at pretty much the same time, in exactly the same spot. It's not like they died on opposite sides of the planet and had to traverse oceans to be reunited.
Anyway, just my thoughts. I still love the movie just the same.
"Is this a cat...in a hat?"
"No, it's a turtle...in a shell."