>>720092137
I came up with the same theory on my own so it's indisputably canon.
Biggest evidence in favor of this is the otherwise completely unexplained line where Lolo tells Popka that Klonoa reminds him of the Goddess Claire, who also looks like Klonoa's species. Also, Hyuponia (the kingdom of sadness level) uses audio clips from Klonoa 1, and the king of sorrow looking like Klonoa definitely makes it seem like that world is his own sadness manifest. And then the ending fits perfectly with Klonoa learning to cope with sadness instead of casting it away.