They changed him in this from a child killer to an accused pedophile. It's odd that a pedophile would be considered WORSE than a serial child killer, but regardless I actually think it works better.
First off, the parents could cover up the mysterious death of an alleged child molester, but everybody in the country would know if there was a mass child killer, and certainly everyone in that town would.
Second, it makes the vigilante parents more culpable. They'd be totally justified in killing a child murderer who got off on a technicality, but even if you believe pedophiles are deserving of death, a lot of people ACCUSED of being child molesters have later been found out to be totally innocent. The movie at least flirts with the possibility that Freddy was innocent before the truth is revealed.
Finally, it makes Freddy more CREEPY. He's kind of a weird folk hero in the original because, hey, who doesn't want to kill a bunch stupid teenagers? But making him a child molester in life makes him much creepier. And there's nothing wrong with that in a horror movie. I thought Freddy eventually got much too cartoonish in the original sequels.
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