This episode was so good, and I hate having to wait! My take so far:
-The "Evil Eye" clearly was that kid who was locked up for no specified reason beyond I'm assuming just to be a sacrifice (probably just an orphan in that time period)
-After his death they placed the body back in that cell and continued building the sacrificial home on top of it, and he eventually appears as a ghost.
-The worm has always been there and likely driving the whole family to suicide (possibly even the reason the first was an orphan) up to the point we first see the ghost noticed by a child.
-It's presented as they have the same effect but I think intentional or not the ghost's focus on the children was still a curse that happens to be protecting them from the worm, and this starts the Kito's practice of burying the surviving child with the house. Resentment of the victims and the ghosts inability to stop it warped what was a ghost into the current yokai Evil Eye (Similar to how Turbo Granny was the gathered resentment of SA/murder victims).
The variable in shows like this are the characters like Turbo Granny and Seiko. We know they have the information but can't know if they are intentionally misleading and vague, genuinely mistaking it for something else/unknown, or just how much individuality there is as a factor dispite being a specific type of monster.
On an unrelated note: DAMN Navi looking fine when she stood up at the end! I see you XD