Miss Giddons is insane and Flora and Miles are not corrupted by the ghosts of Peter Quint and Miss Jessel. In the story "The Innocents", based on Turn of the Screw, Flora and Miles were perfectly content with everyday living until Miss Giddons came along to take care of them. Flora and Miles's parents died, and so did their caretakers (Quint and Miss Jessel), which caused them even more grief. Flora and Miles are very fond of their caretakers, like to play tricks, and Miss Giddons is the only one seeing the ghosts.
First, Flora and Miles are very fond of their deceased caretakers. Flora was very close to Miss Jessel and Miles was very close to Mr. Quint. Both children had admired their caretakers and liked to do activities that their caretakers had once done with them. Flora dancing does not mean that she is possessed by Miss Jessel's spirit.
She is just dancing because she misses Miss Jessel. Miles hums the song that Mr. Quint probably used to hum when the two were together, and this does not mean that Miles is possessed by Mr. Quint.
Next, Flora and Miles just like to play tricks on others and aren't influenced by the ghosts. Since their uncle did not want them around and didn't care about them, the children always had to entertain themselves. Because Flora and Miles only had each other to play with, when Miss Giddons became their caretaker, they felt that it would be fun to play tricks on her. They would play hide and seek and pop up out of nowhere to scare Miss Giddons. They would also go up on a very high tower and freak Miss Giddons out. They would also appear in her room staring at her when she's...