Hank was a super creepy stalker
The biggest twist for me was the fact the movie set up for you to feel sorry for Hank, but then at the end it takes a super dark turn. This is what I took from the film. The movie is a mix of real and imagined things since it is shown through Hanks perspective. There was a dead body. No, he didn't talk, shoot rock bullets, chop wood, etc. You can't even say it's all a dream in his dying moments because of all the stuff at the end.
Hank was never lost. He was never on a deserted island. Hank was a depressed, super creepy stalker that found a dead body. He didn't happen to find his way out of the woods right at the girls house he's been stalking by coincidence. He was camped there the entire time. Hank slid down the hill and got to it, and the little girl was easily able to sneak off and walk there. He was probably going up there to find supplies and at some point somehow went and stole Sarah's diary, which you see she wrote in on the bus and was found in his camp. Hank is also not completely delusional to the point where he truly thinks it was all real. This is why when he realizes they found his camp he says "oh *beep*, they are going to see everything" meaning he understands what he is doing is super creepy.