Another way to look at it is that the kid was always Buddy in reality.
You could look at it as an allegory.
At the beginning Buddy is very stoic, doesn't seem to care about anything anymore except making it to Vegas and becoming king. Though it's never really revealed what his motivations are for doing so.
When he first picks up the kid it might be a hint that the stuff that's going on around him is actually starting to have an effect on him.
At first the kid doesn't say anything. So this inner child or innocent spirit doesn't have much say over him. But it's still this annoying scream. It nags at him and he can't seem to leave it behind or brush it off.
All through out the movie the kid begins to have more and more of a voice and also becomes more and more of a burden, as he gets hacked up trying to protect the kid. If he simply stuck to his guns and forgot about it, he wouldn't have had half the headaches in the movie and would have been to Vegas in half the time.
But what kind of King would he have made if he did that? What would have sustained him?
You then see through out the movie that even though the kid is annoying and is a burden (as is ones conscience, or inner innocence) it did prove itself to be a source of strength as well, in finding means of transportation, and then shows that it can stand up for itself, punching out the "Tag you're it" kid.
Also when Buddy decides to give up his "gig" after killing the guy with the cheap guitar and butterfly sword from the bar, it's the kid that gives him the strength and will to continue on to Vegas.
Then at the end it shows that stoic, ass kicking, katana wielding, guitar playing Buddy wasn't enough to overcome death. It was the kid who took him down.
So the stoic Buddy died, and the inner childlike Buddy lived on, however he also assumed the mantle of the stoic Buddy by donning his clothes, guitar, and sword, and thus the two Buddy's merged as one to become King of Lost Vegas.
Of course we also have the other allegories of the representations of rock with Buddy Holly and Slash and these could also tie into the above in various ways or be completely unrelated.
Anyway, that's what I was thinking when I saw the ending.
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