I'll keep it short and sweet, boneheads: the baby didn't live. The scene in the hospital was a delusion. The "eye change" sequence we see with the shaman is the key clue: it's the exact moment he realizes he's looking at a dead baby. Emma's dead body is hanging from a rope as a sort of punishment. There was nothing supernatural in the entire movie. Emma went nuts, that's all. Now enjoy the movie again, you're welcome.
Review of Shelley
