Otsuu and Little Mermaid first impression

Seems like we got two new characters in Otsuu and Little Mermaid and they seem ultra yuri for each other which is always a nice thing. The issue is, while I do understand that Little Mermaid comes from the fairy tale with the same name, I have absolutely no idea where Otsuu comes from.
Maybe some japanese fairy tale I never heard of? Or something else altogether?
Oh and of course there's Red Riding Hood, but this time with long hair which makes her even more charming!

Right now going through the prologue which is us trying to save an unnamed blood maiden from being trapped. And of course going through the tutorial that is classic for these games. So far everything seems to be identical to the original, just that Jack isn't there to act as controller of the Blood Maiden.
Weirdly the "Massacre Mode" of the blood maidens that was "unrecoverable" in the first game seems to be recovering automatically after battle. Retcon or is there some reason for it?