what is with the old people?

That was the idea. In fact, it was the original idea for Paul Reubens to do a film where he was in a town where nobody was happy, and he'd make them happy. It wasn't until he was writing the script on the WB lot that he saw someone else riding a bike. He asked, "When do i get one?" and they told him something like after the 3rd week of working there. It's common you get your own device to get from place to place.

On that day when they brought him his bike to get around the movie lot, it was an old 70's schwin racer. He told himself, "I'm making the wrong movie." So he dropped the idea about the unhappy people and wrote a new story about the best bike in the world.

When it came time to do the second one, i'm guessing he picked up the first idea of those unhappy people, and somewhere along the line he thought up of the circus idea. Hence, grump unhappy people, turned to little kids, and now they're happy.

most old people ARE grumpy old farts, lol

...it's just you. Those old people were very nice to Pee Wee. I mean, if somebody like that came into my store and dared to ask me for a cheese sandwich AND a pickle (way to ruin a good game of chess, btw)...I'd meat-cleaver their fingers off! You kids these days...with your lava lamps and yer pet rocks and yer 8-tracks and yer hula hoops...makes me sick. Some pinko comes into this nice rural town and starts making a ruckus, then poisons these kind old-timers with cocktail weiners and turns them into children? Bah...save all that flim-flam for someone else. Ain't nuthin' but the Mashed P'tayta.