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The interpretations I've seen (bot being a stretch, but acceptable since the film was enjoyable)
The Lizard persona died when Spidey 2.0 cured him in his movie, he was transported right before that.
Sandman was in his sand form and kinda patchy throughout, the theory I've seen is he was transported from some later date before he lost all coherence and collapsed into a pile of sand.
Loved the film, so they work for me.
Indeed, that could work. (^_^)
I have my own interpretation of what the misfired spell did (apparently, runic magic?): it tried to rewrite the narrative of the hoax that Mysterio had invented and, paradoxically, the new story became a chaotic reality.