The point is that it's a horribly twisted fairy tale. Molly is being forced to read it by a horrible demoness of hell, least the lady chop off bits of her fairy friend. We're *supposed* to be horrified and disturbed by the implications of the story.
I have to say I also enjoy the little dig at traditional fairy tales as well - while there are many that praise the intelligence and resourcefulness of girls, there are also just as many that praise them for being pretty, quiet lumps.