SPOILERS: THEORY
I bet that the Grim Reaper is the King who killed the General/Goblin, and Sunny is actually the reincarnation of the princess the Goblin loved.
I think the King killed the Goblin because he was jealous that he had the love of the princess (and because of the manipulations of his advisor), and that's why when he died he became a Grim Reaper (to pay for his sin). My proof for my theory is the scene with the green ring.. it was the ring that belonged to the princess, and when he saw it and Sunny a tear slide down his face. Also when the old woman/sexy young seller said 'You'll both pay a heavy price for it anyway'. As well as the fact that he has an amnesia.
What do you guys think?