The heroine was named "Melon Princess" because she was born from a melon, right?

Just like Kaguyahime, Momotarou or Issun-Boushi

it seems like she started out as a midget.

Hmm, that's right.

Maybe Seija is having nightmares in return for tricking that inchling. They must've been a different amanojaku, though, since that one died.