thats just a cute way of explaining why there is stuff under rocks. if the piccori are still around and only show themselves to kids then why is there no more mention of them, why is it that you never see them again (seeing as how in most of the games Link is more portrayed as a child) and why is it that their legend is never spoken of (in four swords, the sword is known as the four sword and not the piccori sword as it is originally called).
the fact that the knowledge of the piccori's existence is obviously not there anymore tells me that they arent there anymore.
Okay. First of all, the Picori only are ever visible (or they are only around) 1 year out of every 100. That would explain the absence of them in certain games. As for why the Four Sword is not called the Picori sword, well, after it was infused with the four elements, it was probably forgotten that it was ever called the Picori sword. I mean, it's main ability is to split the user into four, which happens in all of the FS games.
the twili people were banished to the twilight realm long before the events of TP. the only way they could get there was by the sages allowing people to go and leave the realm. when you go to the twilight realm there are pots and stuff to find hearts and such, which, according to your theory, means that the piccori are in the twilight realm, which is impossible because it is stated that the twilight people are the only ones that live in that realm. i rest my case.
As for this, you're right. The Picori cannot be in the Twilight Realm. But, that doesn't mean that the Twili don't have pots around. Why there are hearts in them, well, there needed to be some way of healing yourself. The Picori put rupees, bombs, arrows, and other items in bushes, but there is no reason to believe that hearts aren't just things in the game to heal you. Like, the MC was the real world, you wouldn't find little magic hearts that rejuvenate you.