Holloway explains that she's trying to end this Hell by appeasing to God and going back to the old ways, which includes converting everyone and killing those who won't.
Also, if you remember, the stipulations of breaking off from Silent Hill and founding Shepard's Glen was the sacrifices so essentially, Halloway was trying to return everyone in the town back to Silent Hill because the contract was broken. Why she didn't bring Elle back with her, I don't know. I'm assuming the idea was brought up to Elle when The Order captured her and she said 'No, mum. I can do without the crazy cult religion, thanks.'
Still, since the Shepherds treated Alex like crap his whole life, he was probably chosen at birth.
I agree or sometime when he was younger and they expected to have another child. Alex was 8 when Josh was born so it might have been at the moment they put his name on the plaque.
From what I gleam (this might be conjecture), all the founding families must have had at least TWO children to carry on the name/blood or the contract would be broken. Whether or not they pick their first born, I suppose that's up to them. The Halloway's obviously picked Nora over Elle but as to why, I'm not sure. I suppose they thought that Elle was already establishing her life and Nora's was just beginning?
Still, it's kind of disturbing to have to think about which child you'd have to choose if you were in their place. :C
