The problem is that the hero of time turning into the hero's shade doesn't prove that he escaped the Lost Woods. The shade looks a bit like a stalfos, actually, and I remember reading a theory once that he turns into a skull kid or similar and then an undead stalfos, but because of being the hero of time he was able to retain his goodness, as it were, and his undead spiritual nature allowed him to appear to TP Link and give him visions and whatnot.
The Hero's Shade is a much more skilled swordsman than the Hero of Time was in Ocarina of Time and Majora's Mask, so that alone implies he didn't die in the Lost Woods. Also the Link is Dead theory is easily disproven by the fact that the fall the theory claims killed him actually isn't fatal because Link lands on a Deku Flower, which asorbs any fall damage in the game, even while in human form.
I've always thought that Link turned into a stalfos in the lost woods. Sms made a good point about the hero's shade being an adult as well as a fully trained knight, but consider this...
It appears as though Link is going through the lost woods (looking for Navi) before he falls through the portal to Termina. This portla is similar to others we see in the lost woods, such as the passageways leading to Death Mountain and Zora's Domain. At the end of the game Link goes back to the same woods as before and continues on his journey. So if there were one portal leading to an alternate world, why opulent the be more? If Link were going through the woods, hopping into different areas in search of his home, it would explain a few things. He could learn different sword skills from different lands, earning his armor that isn't similar to anything from Hyrule. The main problem there is the hero's shade in tp, and how tp Link is supposed to be his ancestor.
This leads me to the theory I just thought of one minute ago. Perhaps he did
find his way home after mm. After all, the happy mask Salesman seemed to know the way (seeing as he was presented as a wanderer and Skull Kid stole majora's mask from him in the woods outside of the termina tunnel). So Link came home, had a family, became a knight, whatever. But he still couldn't forget about Navi, and went looking for her in the Lost Woods, as an adult. And the time he didn't come back. The hero's shade expresses in tp
Although I accepted life as the hero, I could not convey the lessons of that life to those that came after. At last, I have eased my regrets.
As far as we know there were no wars in Hyrule directly following oot, not that anyone would have been strong enough to defeat him anyway. It would make more sense for him to die as a hero trying to do something for a friend, and ending up as a poe or stalfos as a cost.
Sorry for the mini rant, this just occurred to me and I'm curios to know if anyone else has considered this (or if there's any better evidence than me pulling one quote)