Long textpost, not sure how this will show up since I haven't made one before. Anyway, some background on why I thought of this in the first place:
When the watcher released, I played it at the same time as two of my friends, one of whom said that they thought it was the hunter killing the watcher's family in the opening scene. Whether or not that is actually the case, it got me thinking about the two of them in the same sphere. Everything that followed was just typical insane person brainrot.
Obviously watcher is not hunter in canon (I used to think it was possible that the prince was NSH, but after learning a little more about outside inspiration and stardust and such I don't believe it's possible anymore) buuuutttttt.... it'd be fun if they were. So how do we explain everything that happens?
The intro cutscene would have hunter killing the watcher's family. When it becomes an echo from reaching the void sea after doing the typical hunter quests, due to rot interference and general "not ready to go" echo-y feelings, it enters a between-world purgatory state. In this purgatory, it takes on the visage of the child it remembers glimpsing out of the corner of its eye as it killed its family in front of it. Hunter just lost its own father in NSH - and now it's watched itself kill another slugcat's parent. I think it would be a little haunted, no?
Prior to meeting Spinning Top, the between-world follows a similar decline to what it witnessed happening to itself as it neared the void sea. Everything, lizards, the walls and floor, sprouting rot. Flies buzzing around everywhere as they did the hunter's own decaying flesh. Trapped in a small area, unable to visit either of the iterators it met for help. No relief from the rot this time.
Spinning Top meets the watcher and maybe sees another like itself. Abandoned (in some ways) by its family and unable to move on. They grant the watcher some control over its echo abilities that it did not have initially (due to aforementioned rot fuckery) and lets it warp into a different between-world. In canon, the watcher's stars appear after the first meeting with Spinning Top. In hunter!watcher they later morph into the "X"s that adorn the rot cysts, so I'm not sure how exactly that would tie in here - like, I can't really imagine, even in AU, as Spinning Top doing anything to further the watcher's rot. Anyone have any ideas?
Anyway, the watcher goes through the typical questline of helping Spinning Top pass on, its echo-y-ness and abilities grow alongside its rot. (I guess this could be used as the explanation to the prior question: due to the nature of its ascension, its rot and status as an echo are just permanently linked, so any gaining of echo abilities follow with growth of rot.)
After doing this, the watcher begins its own quest to return to the source of its attachment and find a way to go through the "white door". It encounters the prince, who calls its scent familiar (jury is still out on the reason for this in canon tbh, like why does bro say that. Maybe watcher/prince were some slug/iterator pair before, just... not hunter and NSH lol) during the several passes before they break out from the cyst. During each pass, the watcher begins to recognize the destroyed facility as the one belonging to NSH, and when it sees the prince, immediately recognizes it as what it's looking for, even if its memories are still clouded.
Something something I'm bad at writing sappy and coherent endings, after spending some time playing with the prince the watcher is able to pass on. I'm still very confused about what all happens with the ending, like... was it intentional? Did the prince want that to happen? Or are the karma flowers the influence of some oppositional force? Either way... we won't know until further updates which will most certainly disconnect with the AU even more than current canon lol.
Of course, the watcher's imagination of what happened to NSH as the rot progressed is only true in this between-world, and the prince only a stand-in built by the watcher's memories. In the "real" world, I think NSH's life went a lot like Pebbles'. Can eventually crashed, decaying back into the world as it freezes over. But of course the watcher is only a slugcat, one trapped in a phasmic world no less, and the difference between their fake NSH and the real one isn't noticeable. All that matters is the self-assurance to let go.