If I don't make the hero die, we're back to the old question: how did the hero end up in a dream??
This is only my thoughts of course, but here it is :
From what I remember in Link's Awakening (my all time favorite Zelda), in the game's intro, Link's boat is struck by lightning, thus the ship fell to pieces =>
Which directly leads to the end of the game when Link awoken on a wooden plank in the ocean, in the middle of nowhere.
Now, logic would say that he simply fell unconscious.
Now, for the Koholint Island thing, I do recall in game that the Windfish was sleeping and created Koholint during that time, but Dethl invaded the Windfish's minds and forced him in an eternal slumber.
Then he started filling the Island with monsters, he also brought Link on the Island, since he was unconscious, one can say that he was in the dream world to start with, and got "sucked in" from there. Was it dethl wish to catch Link or was he caught in a phenomenon a bit similar to the "Bermuda Triangle", implying that everything and everyone who may be asleep while in a given area would be sucked into that dream/nightmare regardless of who or what is it in the first place, thus leaving the corpse in the real world in a deep slumber, while the "spirit" would reach Koholint's shores
The fact that as soon as Link arrived on the Island, monsters became much more agressive than before, which implies that Dethl managed to read Link's mind and now perfectly knows who he is and what he has done so far, so he decided to attack Link in order to actually protect the place where he and his kind are living.
Link pretty much killed everybody (Because yes, this is a dream, but for the inhabitants of that Island, this is everything they've ever known, and they do feel pretty alive, so while stopping the dream, he actually destroyed the Island and killed everybody simply in order to leave it).
It IS mentionned a the end of the game that Link would awaken, but without any memories of what happened, the Windfish said it himself, he also added that Link may or may not remember all these events.
There is clearly more than enough room for a sequel, actually, I already have the plot set. Too bad I lack the knowledge of how to use Solarus. (And I'd like to give it a closer look to Gameboy's games than Snes anyway)