Avenging Angel
Since my prior explanation is long lost to time I'll shoot again, although I must admit the last time I saw this film was at its American theatrical debut. Therefore, I can't give you as concise an explanation as I would have once been able to.
This is a movie about the senselessness and perpetuation of child abuse. The Slit-Mouth woman is an "avenging angel", she punishes bad parents and "rescues" pained children. Note the purely senseless acts of violence masquerading as child punishment? Note how it's only abused and mainly neglected children that are abducted? Note how the children "just disappear" from their abusive environments and their murders are never shown (no blood either?). Perhaps she takes the children to a "better place". The aspect with the candy and punks has been created to relieve the general public of anxiety. The public need to believe that she has weaknesses and horror stories always develop absurdities (especially when told to imaginative children).