I know this is a lot different than the map of the game in the original Ocarina of Time but the Great Deku Tree is located within the Lost Woods - which enables skull kids to live inside the Deku Tree. I thought this would also make more sense since I've already described the highway and how there's only one woods that Saria and Link travel into in the beginning.
"Hey! You know where you're goin', right?" a small male child's voice questioned just a few footsteps behind Link. The boy turned around and looked down at the creature that had just spoken to him. The Hylian boy, in utter shock, took a step backward - the little boy's head was a yellowed, cracked open skull and his arms appeared to be made of wood!
"What's the matter? Why are you scared of me?" the strange child asked as he grabbed ahold of Link's leg with a wooden hand. Looking into the creature's face, Link realized his new acquaintance appeared to be scared and sad - unaware of his outward appearance or where he was.
"He's a skull kid, master. He wasn't always like that - he only came to be what he is now from getting lost in the woods... Poor thing..." Navi said as she looked over at the skull kid; a sympathetic look in her brown eyes.
"We'd best better get going though. I'm afraid there's nothing we can do..." the dog added as she walked off; deeper into the Deku Tree. Link turned back toward the skull kid and grabbed his hand - then lead him in the direction his dog was heading.
Link dropped down into the hole that was in the center of the Deku Tree with the skull child in his arms and landed back in the water that he lied in just days ago. After he got up, he found a whole village of children that had met the same fate his new friend had. Looking around, he saw that not all of them looked the same... Some didn't even have heads or other limbs, and others looked something like the boy that Link had just met. What they all had in common was the fact that they were all children who had never found their way out of the woods.
The blonde hero wondered: didn't they ever think of leaving this place? Navi then, hearing her master's thoughts, responded.
"They don't exactly appear to be unhappy about the situation they are in, am I right? This is because they are cursed. None of them have any desire whatsoever to leave these woods and it is impossible for them to leave the forest. It's all part of the curse, Link, and try not to get stuck in here too long or you just might become one of them..." Navi said as she looked up at her friend. Link, again having no idea how she had gotten where she was without any assistance, curiously focused back on the area around him - the city of the lost children.
"Where are you tryin' to get to anyway? We'd love to have you stay - you're our new friend!" the skull child said as him and a group of his friends gathered around Link and formed a tight circle around him. Hesitantly the hero pulled out his sword and slashed away at the children before running off to the other side of the city.
It took the boy a few moments to realize that the group of skull children that had gathered around him had somehow fixed themselves back together to chase after him.
"Oooh! Are we playing tag now?" one of the happy little skull children giggled as she and the other skull kids trailed after Link - not intending to hurt the Hylian in any way. All of the skull kids, since they were cursed, had it wired into their minds to try and keep any child who wandered into the Great Deku Tree and make them become one of their own. Link, however, had no intentions of staying and would do all that he had to to rescue his dearest friend.
