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Leonard Smalls really is a demon of vengeance unwittingly summoned by Hi when he kidnaps Nathan, Jr.
This is how Hi sees him when he dreams about him, but after that point the movie treats him as just a really scuzzy bounty hunter, and we're led to believe that Hi's dream was exaggerated and tinged with metaphor. However, consider that there is no way for Smalls to have tracked down Hi and Ed -- he's seen investigating the hole in the ground where Gale and Levelle emerged, but no logic could link that prison break to the kidnapping -- and when he goes to their house, having never even seen the place before, he goes straight across the messy room and picks up the newspaper clipping that tells him where he needs to go, even though it's partially buried. He's clearly exhibiting some superhuman qualities here. That and his motorbike seems to growl and roar at times, and he has the same Mr. Horsepower tattoo as Hi, and other vague hints.
Leonard Smalls is Hi's father.
They share a tattoo, and it explains why Hi was dreaming about him.
Leonard Smalls is Nathan, Jr. had Hi not given him back
He's the Worst Case Scenario of what could happen to Nathan Jr., and, as such, is in the back of Hi's mind. He's not REALLY there, he is a symbol of Hi's guilt, haunting Hi.
Dot is the mother of Hi's future children.
Ed allows Hi to have sex with Dot so they can have kids of their own. We already know that Dot is willing and wants more babies of her own. We also know that the reason Dot and Glen couldn't have more kids was that Glen was unable to.
Leonard Smalls is Surtur.
Well, he sure looks like a Norse fire god.
Leonard Smalls is the same Lennie Smalls from Of Mice and Men
After getting shot by George, he didn't die, it "cured" him of his mental problems. But at what cost? It left him bitter at life, angry, so he turned to body building, he turned to violence, and he turned into this.
Hi and Smalls are both black-market babies
Smalls mentions he was born and sold on the black market, maybe the tats are a form of branding.
Smalls is a Horseman of the Apocolypse