Little kids have that extra sense (or maybe they are just so full of wonder that they miss nothing). My grandmother was is a nursing home when my sister and I were around 5/6 ish. Spouses were kept together. Alice and I visited with everyone (like Oscar). We would "talk" to stroke patients or others who couldn't communicate verbally and would tell people what the patients wanted. We had a pretty good track record. And then we outgrew it.
I think also, kids act and sense naturally, so they just respond. What a wonderful experience for you, your sister and the residents. when my aunt was in a nursing home, the residents would light when kids were around or when the therapy animals would come in. It brings life to them.