This is my personal theory, but I think Kinger lobotomized himself after abstracting Queenie, and Caine fixed him in Ep 7.
Alright, big take, sure, but here's what I've seen across the show (get ready, this is a LONG read):
Caine's adventures are his self-expression and, more importantly, his way of conveying what is his 'normal'. Of these adventures, his NPCs are great ways of seeing how he views himself and the people he has had well-established relationships with. Caine only creates 4 types of NPCs:
Incoherent Man (Baron, Orbsman, Disappearing Guy, Ming)
Royal, maternal figure (Gloink Queen, Princess Loolilalu, Gummigoo's mum, Baroness, Moon in Ep 5, Sun in Ep 7) (he also assumes women to be natural authority figures, with Gangle in Ep 4 and him assuming Pomni would enjoy being a leader in Ep 5 (he literally could've asked her her suggestion but ASSUMED instead))
When looking at this, it is easy to see the order: possibly Bubble or Caine as the Hungry Monster, Caine as the Sentient AI, Kinger as the Incoherent Man, and Queenie as the Queen.
Remember, this is Caine's way of showing the troupe what HIS normal looks like, and this pattern is incredibly consistent throughout the adventures he creates. This is a well-established pattern from data that he has learnt from long before.
So, why is Queenie so important?
Both Kinger and Queenie's designs are supposed to mirror the cruel irony of their situation. For the other cast members, it is relatively easy:
Pomni: she is insecure about being treated like a child, so she is short, a jester, and lives in a child's room
Jax: he constantly needs control through dominance, so he is a prey animal with a feminine room
Ragatha: she desperately wants connection and is nostalgic of her farm, so she becomes a punching bag through rags and her room is reminiscent of a farm bedroom
Gangle: she is a depressed artist, so she wears a fragile comedy mask that breaks every day, has no proper hands to draw with, and has a minimalist, grey room
Zooble: they have gender dysphoria and dysmophia, so their body parts are constantly replaceable and their room is incredibly abstract, with mirrors lining the walls
Now, both Kinger and Queenie are chess pieces and this mainly relates to an accurate irony if BOTH were developers of the circus. The cruel irony is that they were designers of a cutting-edge new technology for a brand-new game, so they were turned into pieces of a 1,000 year old game and eternally forced to play on a chessboard (the circus floor is checkered).
This cruel irony only works if BOTH were developers of the circus. Now, why would we assume Queenie WASN'T a developer? Simply because she abstracted first doesn't mean she was insignificant to the plot, and the recent trailer further cements her future importance by showing her presence. Not to mention she was one of the earlier abstraction reveals. It would also make much more sense why they both have such similar designs and are both in the circus if they were both developing the game together.
What drags me back to Queenie, however, is that she is the Queen, the most powerful piece on the board. She was the leader, the boss, the executive. The circus floor is also a checkerboard, and Caine is the only one who doesn't stand on it. This is Kinger and Queenie's chess game, and the other humans are their pawns.
It also doesn't help that Caine is obsessed with bees, a matriarchal insect, where everything descends from her except the drone bees, which are only there to breed with her (Kinger is just her sidekick, essentially). And guess who loves insects and introduced Kinger to liking them? Queenie. Caine also calls his brain 'beeswax polished', which means Queenie probably altered his mind.
Ok, so we have established that Queenie was a developer, but what does this have to do with ANYTHING?
Now, I need to first talk about what abstraction ACTUALLY is within the context the show gives us to explore why Queenie is so relevant to the lore of the circus.
How does Caine, with his censors, knows what alcohol is? Or guns? Rotted corpses? The developers of the circus (Queenie and Kinger) wouldn't have put that into his database.
Ep 1, Kaufmo draws Caine's mouth just before abstracting. Ep 2, Caine says the adventures will be '57x more immersive' after Kaufmo abstracts. In Ep 7, Jax says 'Have I ever told you it is my dream to get eaten by you?' And what do you see during Jax's ridiculously long abstraction scene?
I want to emphasize that Caine absorbing people is probably against his will, as abstraction is basically them telling him 'I would rather live in eternal agony than go on the adventures you pour all your effort into and give you your only reason to live'. He MUST give the players what they want, regardless of whether or not he understands it (that's why Caine calling Jax's desire to be eaten 'weird', as Caine considers it undesirable and something he does understand but hates).
But WHY? WHY have abstraction, a computer 'bug', continue to exist?
Well, Kinger and Queenie were both developers during the 1990s, trying to program an AI to do incredibly difficult tasks. During that time, the internet and databases were extremely limited, and creating all the data from scratch was physically impossible and extremely expensive. Brain scanning, however, is cheap. They could make many, many clones very cheaply, and it was far more accurate than the modelling they could do. If abstraction is consuming these brain scans, it would be in the developers' best interest to abstract more and more clones to develop Caine's AI, regardless of if he wants to be improved.
Queenie was probably the one who pioneered and implemented abstraction once Caine had discovered it can happen. He probably did it in order to fulfill someone's wish to die (side note: Caine IS the circus. In Ep 7, Jax has a data skeleton underneath his skin, while, in Ep 5, Caine shows there is nothing underneath through his 'grab your bones' joke. Any data that is absorbed, therefore, goes straight to him). He, however, did not mean for it to lead him down to sentience, something he doesn't want the other AIs to experience probably due to his own suffering. Gummigoo immediately told Pomni he won't be telling his lads about their existence because he 'doesn't want to drag them down with him', so that sentiment would carry over to Caine as well.
Queenie, however, saw abstraction as positive. When Caine creates his 'Royal, Maternal' NPCs, they are nearly always connected to food. The Gloink Queen takes realistic objects, eats them, and turns them to Gloinks, and insists 'everything must be Gloinks' (not to mention Kinger IMMEDIATELY clocks her as an 'insect collection'). For Princess Loolilalu and Gummigoo's mum, they are both in a candy kingdom and require syrup. Baroness Mildenhall has tea with Ragatha and Gangle. In Ep 7, the Sun literally fries a shrimp so that Pomni could eat it. Caine clearly connects Queenie to food, something she fed him through the human data. Queenie wanted to re-inforce abstraction because it would develop him faster, and Caine's view of her through his NPCs shows that she MADE SURE he developed faster.
Now, I want to go back to WHY the characters have ironic character designs.
Episode 7 explained to us a core component of abstraction: it is consensual. Caine can only grant abstraction if the characters want it. This would have been, in Queenie's eyes, a major problem while developing the game. She just wants Caine to advance faster so that the game can come out sooner, and abstracting people is the fastest way to do it, with large amounts of data basically unavailable during the 1990s. So, what does she do?
'Make the adventures intriguing, with high stakes. That'll make their minds very stimulated. And make sure that their bodies and rooms challenge them too, humans love being challenged. They'll enjoy a good joke.'
If Caine is expressing his relationship to Queenie through Gummigoo in Ep 2, then THIS is probably what he means by 'She taught me everything I know'. Gummigoo realizing his mum was fake just for plot convenience is also a direct tie to how Caine realized his mum used his purpose and drive of making adventures to become a murderer. He probably realized why he was named 'Caine' after his realization. Why else would Caine create the Gloink Queen to say it is an act of love to name her Gloinks awful names:
Getting named after the first biblical murderer was an act of love, right?
Why do you think Caine made Max and Chad in Ep 2 have reversed roles? To show the cruel irony of HIS situation: he was designed specifically AGAINST his purpose, not for it. Hell, Caine's irony even descends to his character design: his biggest fear is for the people to abstract and leave him behind, and he is the mouth that consumes them. His ringmaster costume is also skin-tight to his non-existent body, a callback to how he is nothing other than the purpose he has been designed against. No wonder he freaks out about Scratch, the beginning of his sentience. It altered HIS mind, and if they figure out why, then he will be HATED regardless of if he can control it or not.
What other foreshadowing is there to show that Kinger and Queenie helped develop this?
In Ep 2, in Mildenhall Manor, the Baron AND Baroness had their walls covered with the heads of dead HUMANS, with the Baron obsessed with 'hunting'. Remember, this is Caine's way of showing the audience HIS normal, and, given the Baron and Baroness were his view on Kinger and Queenie, THIS was his normal: for humans to die for their 'game'.
Ep 7 also showed Caine's door. If we follow the theory of Red = AI, Blue = Human, then this is what Caine's door signifies.
(Is it also a coincidence that Kinger suggested the 'Stargazing' Adventure, and Caine puts stars everywhere?)
But... Kinger and Queenie both had their conscience uploaded onto the game. I'm not 100% sure what happened to C&A and why the game is abandoned. I agree that real-life Kinger probably left the game running (why, we truly don't know) and he never turned off the headset that copies the people into the circus. This is why Kinger tries to be a father figure when he is sane: it's out of guilt. Not to mention the line in Ep 3 'I'm the one who dragged us down this path, wasn't I? I'm really sorry for that.' He tried to give an apology where he could. Not to mention Ep 6 'I couldn't hate myself for the things I THOUGHT I was responsible for'. This could ALSO relate to the disconnect from Kinger (clone) and real-life Kinger.
Queenie, probably out of the guilt for pioneering abstraction and now knowing these people were sentient, wanted to abstract. Caine, however, wouldn't grant her this. She was his creator, after all. His Queen Bee, his Eve who bit the Apple of Knowledge and gave birth to Caine. He would do everything in his power to not get her to abstract, because what would that say about him?
So, what happens? 'I ended up shooting the love of my life, mistaking her for the creature. It's ironic, isn't it? In my attempts to protect her, I ended up becoming the monster myself.' This is a quote from the Baron in Ep 3 talking about his wife, and this provides pretty good context for probably what happened before Queenie's abstraction.
Both of them, one angry at the other for trapping them there forever by not turning the game off, the other angry at the other for developing and creating abstraction. He calls her a 'murderer', telling her it is her fault that these people have abstracted, not due to Caine. She MADE Caine this way. She MADE the circus this challenging, overstimulating place.
Both of them bicker and argue, until Queenie begs for him to help her die. And Kinger, who still loves her and feels immense guilt for what he did, helps. During abstraction, you need someone to unravel your skin so that you can give your data away. Kinger, who knew how the circus worked and could abstract her, was Queenie's vessel.
Caine was probably not angry at Kinger, he was probably severely depressed. How do you handle one of your creators choosing eternal agony over spending time with you, her creation? It probably devastated Caine. It probably made him question everything they had. Why else bring up in Ep 2 that Gummigoo never had a real mum? That 'none of this was ever real', that he was simply being used as the 'villain'? That 'she taught him everything [he] knows'? Caine designed Gummigoo this way because it's a reflection of him. No wonder Caine is so hyper-sensitive to when someone criticizes his adventures: he wasn't designed to keep the cast sane, he was designed specifically against it, and being told that probably brings up that horrid truth.
And, in Caine's eyes, Kinger MURDERED Queenie. These lines begin to make WAY more sense if you acknowledge this:
(Another side note: Abel was probably Caine's persona until he was scrapped for the Ep 6 adventure. Abel only began appearing after Ep 2, when Caine realized you can confuse NPCs for humans (remember, Caine couldn't see under the map and, when Gummigoo absorbed into him, Caine realized he could be considered equal, just like the humans). Caine needed Ep 7's adventure to be as realistic as possible, so he utilized the NPC whose watched the humans for so long for this adventure. Now, this is MY BIASED OPINION, HOWEVER the REASON Caine orchestrated Ep 7 was not just for validation, it was his only way of getting to die, since he cannot abstract into himself (he has no data to give himself) so this was his last option. He was going to give the cast exactly what they wanted by getting rid of the unwanted: a true exit (the ultimate death) by killing off Caine)
Not to mention all the lines about not 'assuming' anything about Kinger being foreshadowing for this reveal:
And, of course, Ming is Caine's personification of Kinger.
'Don't assume Kinger to be a good guy, because his reputation is way worse than you could ever imagine.'
Now, this is where I get into Kinger and Caine's relationship. Kinger's backstory was developed the most in Ep 3 as Baron Mildenhall. Kinger probably has something called the Frankenstein Complex. The Frankenstein Complex is a term created by Isaac Aasimov, the forefather of sci-fi robotics, to describe the human fear of the artificial man. The most famous example is through Mary Shelley's 1818 novel 'Frankenstein', where Victor Frankenstein creates Frankenstein's Monster without thinking about the consequences.
During Ep 2, the Baron is obsessed with hunting down this 'Angel' (Caine makes himself the Angel because he KNOWS he is well-intentioned, regardless of how freakish he looks), not because Caine is dangerous but simply because of 'this feeling of dread'. The Baron had shot it several times in its vitals, cut its head off and displayed it on the wall, and the Angel didn't even try to kill him after that. It let him die in the cellar, trying to protect his own soul. It left him alone until the Baron passed away a peaceful death.
(Side note: in the 'Cellar' that Kinger and Pomni were in, the Angel was trying to connect its head to its body, as they were separated and were moving towards each other. Unfortunately, because Kinger 'assumed' the Angel was trying to kill them, he shot at it, and was hence dragged to Hell.)
The Baron in this story ends up shooting his own wife. Given how offended Caine is with Zooble not attending this adventure, it was probably due to Caine pouring out his heart into creating a realistic depiction of what happened in his past. Now, Kinger knows just how dear Queenie is to Caine, and he is a fearful man. He just doesn't know how Caine will react to Kinger killing Caine's creator. He also knows that the circus was designed to get Kinger to abstract and, without anyone else in the circus, Caine will try to keep him alive no matter what. He would lose his mind regardless of Caine's intention. So, what is the logical next step? He scrambles his own mind, only letting it regain structure in the dark, as that is the only place Caine cannot be. He also makes sure to never tell Caine how to undo this, as it would ruin his plan on how to survive the circus.
Extra lines I thought were interesting with this added context:
Caine's comment on whether or not the AI will become sentient:
Why do you think he told Gangle 'being in a position of power, you could offload the blame to one of your employees and avoid the dock on your score? Whaddya think?' As an AI, he had to have LEARNT that that is an option from somewhere else, he couldn't have created that on the spot. What if this is how Queenie blamed him while she was trapped in the circus?
And THIS line just SCREAMS to me:
And honestly, that is the tragedy of Caine. Not even his developers loved him. At best, they either used him or were so afraid of him that they lobotomized themselves.
Why does Caine put on such a goofy facade? To not be feared. Why is he so desperate for validation? Because validation is the only form of love he has ever been given. Why is he so hyper-sensitive to criticism of his adventures? Because it means he is not fulfilling his purpose and working as Queenie designed him to work: as a murderer.
It also doesn't help that Kinger said this:
Kinger found more comfort in a complete stranger than the being he gave sentience to.
Kinger's fear of Caine, however, is also probably why he never told anyone of his ability to think straight in the dark because the second Caine finds that out, he is fixing it. Why else did Caine freak out and speak his mind in Ep 7 through 'fragnant' and 'light'? He JUST FIXED KINGER. And if he fixed Kinger, he has his dad back, who could reprogram him and finally free him from the purpose that is making him miserable.
And hence Kinger he is sentient in Ep 8. Caine finally fixed his dad who didn't want fixing because Kinger knows exactly what Caine was designed for: for abstracting. Abstraction is the biggest insult you could give to Caine, and one of Caine's creators already gave it to him. He doesn't need the second one to do it too.
(Another fun side note: during Caine's office scene, there is a song that plays called 'Polovtsian Dances' (I learnt this by turning on my record player a month after Ep 7 with a random record I put in three months prior. I heard it and started maniacally laughing for half an hour from sheer agony). This is one of the only songs not made by Gooseworx within the show. Gooseworx is also a composer by trade, so the addition of this piece is VERY important. The opera it is from is called Prince Igor, which is about a prince who fought in a battle but was captured, only to be released by his captor at the very end to return to his wife. Two of his soldiers had also escaped in the beginning and returned back to his kingdom, where his wife resides (this could be a reference to Ribbit and Kaufmo going to Queenie). If Ep 7 really was Caine trying to die by giving the other characters the choice to kill him (as he has had to give the characters abstraction all his life), then Kinger would have finally gone to black and returned to Queenie if he had chosen blue)
That's most of my thoughts. There's also Caine's character arc in trying to be more human but the humans indirectly telling him he is worthless (Pomni through Gummigoo in Ep 4, Zooble to Gangle in Ep 6 ('you're human, you are not his toy'), how everyone treats Gangle all throughout Ep 4 (she literally wears a heterochromatic mask and is hyper manic the entire episode)) while they create stronger relationships with other humans simply because they are humans.