Listen to this....

So if (as an IMDb poster mentioned some time back), Kathleen never spoke of her father, but often mentioned her mother, then here is a plausible scenario that will send the whole cutesy of this great film straight to hell:

Schuyler Fox, Joe's Grandfather had long ago "dated" Cecilia, Kathleen's mother who was "too young" for him. But having a thing for women "too young" for him, landed him with an eight year old (or so) daughter (Annabelle). If Schuyler had a fling with Cecilia and possibly fathered Kathleen as well, and then skipped out, never to be known or spoken of by Kathleen, that would make Kathleen the half sister to Nelson and Annabelle and Aunt to Joe and Matt.

You're welcome.