Note: this is operating within the framework of Azor Ahai = ultimate villain of the ASOIAF series.
The monster = the volcano. The volcano that is implied to sit below Winterfell was compared to a dragon in TWOIAF, suggesting that other legends where volcanoes are represented by monsters are likely.
(The maesters are, as ever, wrong. You should consider the possibility that a Planetosi volcano is more than just a volcano very thoroughly).
The boiling blood = lava. Lava is referred to as "the black blood of demons" in reference to the Doom.
The mouth = the crater or caldera. This bit fits extremely well imo.
Melted eyes dribbling down its cheeks = lava flows dribbling down its slopes.
Body burst into flame = everything on the mountain or in its vicinity going up in flames.
So the implication would seem to be that Lightbringer might be an actual sword, or some other manner of magical weapon, with the power to split the earth itself and unleash a volcanic eruption. This would doubtless be incredibly effective against Others; if obsidian which is solid lava can kill Others with a touch, a volcano spewing the liquid form in all directions would probably kill every Other for miles around. And it would bring a hell of a lot of light.
Of course it would also make Balerion the Black Dread look like a responsible tool of conflict resolution by comparison. This is the ASOIAF nuclear option and I can't imagine anything good coming of it, especially since it would be only a matter of time before it was turned on other humans. And unlike in our world where volcanic eruptions are natural processes that actually enrich the land in the long term, volcanic eruptions in ASOIAF are decidedly supernatural in nature and blight the land for centuries. There's the Doom of course, but probably Hardhome as well.
Was somebody trying to forge a Lightbringer in Hardhome? Valyria? It's unclear, but possible. And what's with all this talk of demons and ghouls? That's just silly superstition right?
Well, consider this is Planetos we're talking about. Consider that the Others are dismissed by most as superstition despite being very real. Consider the mysterious ancient structures of fused stone that look suspiciously like corks on a bottle, built to "keep out the demons of the Lion of Night." Consider the other structures built over volcanoes guarded by gargoyles and cold iron. Consider that afterlives and souls are 100% confirmed in ASOIAF, and consider that the many faces of the God of Death (R'hllor, the Stranger, the Lion of Night) share strong similarities to Yaldabaoth, an entity that rules over a subterranean realm of chaos containing the souls of the damned.
In short, no, I don't think it's superstition. I think GRRM has been using the threat of the Others to distract us while subtly hinting that the prophecy about a great hero with a magic fire sword waking dragons from stone is about punching gaping holes in the fragile shell protecting their planet from a subterranean nightmare realm of chaos monsters.
Oh, and a slight modification that might fit the legend better is that the monster Azor Ahai drove Lightbringer into with intent to destroy wasn't a single volcano. It was the planet. Yikes.