Wow TJ story...... wow....
SPOILERS
Flynn's hallucination is best described as that, a hallucination. He is trapped in an endless purgatory after killing himself in the mines. The talk with Sydney was a dream and part of his hallucination, more how he wishes things with Sydney would have turned out if he lived. The monster is more a manifestation of Echo's curse or the traumas of the town. Not any sort of, folk-lore monster.