It's always interesting to see what stories are evoked by pictures. I can imagine that the castle used to be a bustling place protecting a large area in the surrounding area. After a siege and many, long years of peace, the castle fell into disuse and eventually disrepair. The surrounding community shrank until a core group of families were left and gradually became a self-supportive town along the lightly-used pass into busier areas. The families are happy, times are stable, and children are already dreaming of moving somewhere else.
I don't know if it's a coincidence or not but I grew up in Dorset (UK) and this whole scene, especially the ruins, are reminding me so much of Corfe Castle, it's hills, and the village around it. If it is a coincidence it's freakishly accurate, if it's based on Corfe then it's amazing and I spotted it instantly.