He's clearly meant to be a reminder of Myau from PSI, after eat the nut and growing wings:
Do you think this is actually Myau himself or another Musk Cat that has transformed as Myau did?
This is what he says in the game:
Old Man wrote:Good of you to come, visitors. I'm the chief of this valley. Hmm, there is good in your eyes. No wonder you were let through. It's really strange... I have a feeling that this is not the first time we've met. I feel good about putting this in your care. This is a treasure that has been passed on generation after generation. Take it with you. It's the Silver Tusk!