The merchants are not selling items at happyville, this straw hat snowman should sell ordaments for example.

Confirmed — and it's two dead NPCs rather than a missing town.

Happyville itself is fully built: all 20 of its maps, the tree, the snowmen, the Shalom Temple next door, and the quest chain you found on Rooney. What's broken is getting in and out.

Rooney, the one in Henesys who asks "Did you hear about a town nearby Ellinia that's covered in snow?", is supposed to follow that up with "I can take you to HappyVille. Are you ready to go?" and warp you there. In our build he only hands out his two quests — the ride is missing entirely. And Rupi, the one you found inside saying "Come talk to me if you want to head back", is supposed to ask "Do you want to get out of Happyville?" and send you back to the town you came from. She makes the offer and then nothing happens.

Both are plain yes/no warp NPCs in the reference server, and we already have exactly the right plumbing for this — it's what Simon (the Happyville to Shalom Temple guide, who does work) uses. I'm wiring both of them the same way. Until that ships, the Dimensional Mirror in any big town has a Happyville entry, and it's currently the only way out too.

Your screenshot caught it exactly: Rupi says 'Come talk to me if you want to head back' — and then nothing happens. He was never wired up, so Happyville was a one-way trip. The map's two walk-out portals lead nowhere in the v83 data, and Simon only ferries you between Happyville and the Shalom Temple, so once you were in you were stuck. Rupi now asks 'Do you want to get out of Happyville?' and takes you to Ellinia, which is exactly what his real v83 script does when it has no saved return town to send you to.