I do tend to think she means in a very literal sense, and in the way that most people tend to think of her pronouncement: that there will be a catastrophe of unparalleled significance and people will die by the millions.
How else would've she said it if she meant to signify a "death by sub-replacement fertility"? Right after showing the children the terrible vision of hell is when she said "various nations will be annihilated" (cf. The True Story of Fatima p. 28 [PDF p. 30]). Also, "the sins that bring most souls to Hell are the sins of the flesh."
I think the only way she could have said it in a way for people to understand is that people would stop having children -- but there again, within that cultural and historic context, people would not have understood that. We are living in times that are so radically altered that we forget that there is so much about our modern age that Catholics in other centuries couldn't possible have understood. Even if she had phrased it like that, as people not having children, people could not have understood because they didn't have birth control and they also couldn't understand any mentality that avoids family life and children. It would simply be seen as abhorrent.
On the other hand, I actually am saying you could be right -- so many of her pronouncements and manifestations are multi-faceted because they are supernatural. For instance, there's a lot of about the
tilma with her apparition at Guadalupe that has baffled scientists. Again, there would be no way to convey that to people in that time period, but it only became obvious with the scientific advances of the modern age (the Lanciano miracle is another example, as we're able to identify the tissue and DNA)...
We don't understand everything God has planned. I also get the sense with these apparitions that a lot of the info is censored, for lack of a better term, to protect us psychologically and spiritually, in the same manner she only showed the visionaries hell for a moment, at Fatima. I believe the children said that it would have scared them to death?