Having children seems important to PIotrek/Smithy's storyline. In old world Poland, the "Smithy" character's wife could not give him children, and he cheated on her with the Lost Girl. In Sue's reality, Smithy is incapable of fathering children, perhaps due to the Phantom's curse.
Nothing in the flashbacks indicates that the Lost Girl was actually impregnated by her lover, or had any children at all. It is possible that she lost her son in utero, as Sue did when replaying the Lost Girl role. The son's origins also may be magical: by breaking the curse, Nikki not only freed the Lost Girl, but allowed her to live out her dream of having a family with Smithy.