genetically selected so that they have a lot of 'touching' or 'loving' actions when they are younger

Socially engineered, not genetically selected. One of the primary elements of the setup is intense social engineering. Though, eugenically, yes, I guess they are genetically selected for this because if they deviate from social norms a little they are killed in the night and all their friends' memories are erased. But it makes it sound like you're missing the point to call it genetic selection.

idyllic community

Hm. In a way. It is far from a utopia. They're confined to their own borders by the monsters they imagine. They must test, trick, and cull their young for the purpose of control and stability. Civil offences are punished with hypnosis and memory erasure, if not immediate assassination - though the testing and culling is so rigorous for the young that it's unlikely an adult ever commits a crime. Outside of these downsides, it does have a lot of nice and cool features, and I'd consider living there (as if immigration would be possible).

I don't really agree with your line of interpretation, but it's healthy to use these things as tools for helping you understand the world. So, no, you're not crazy.

I think of the balloondogs, myself. A monster made from pure imagination. It's highly reflective of the phenomenon with anti-racists hunting racism: you have a person who believes racism is extreme and rampant, they look and fail to see it, but they don't change their belief, instead they look harder and eventually create the racism they wanted to find. Having monsters is a terrific way to control a population. "Don't leave the security zone of Home, citizen, or you will be faced with danger!" Though that setting's social engineering is so powerful that they don't even require monsters to keep the citizens in town.

I forget the term, but the people that go nuts and lose control of their powers are pretty interesting. It makes me think of sociopaths. Sociopaths are great at adapting, and are the primary pitfall of social engineering efforts; the sociopath just mimics the actions they see without being affected by the brainwashing aspect. Then suddenly they stop acknowledging their neighbours as people and nothing can stop them from destroying the town. The real world has no attempted safeguards from sociopaths, and in fact, much of our society's systems are set up to safeguard and benefit them over non-sociopaths.

genetically selected so that they have a lot of 'touching' or 'loving' actions when they are younger

Socially engineered, not genetically selected. One of the primary elements of the setup is intense social engineering. Though, eugenically, yes, I guess they are genetically selected for this because if they deviate from social norms a little they are killed in the night and all their friends' memories are erased. But it makes it sound like you're missing the point to call it genetic selection.

idyllic community

Hm. In a way. It is far from a utopia. They're confined to their own borders by the monsters they imagine. They must test, trick, and cull their young for the purpose of control and stability. Civil offences are punished with hypnosis and memory erasure, if not immediate assassination - though the testing and culling is so rigorous for the young that it's unlikely an adult ever commits a crime. Outside of these downsides, it does have a lot of nice and cool features, and I'd consider living there (as if immigration would be possible).

I don't really agree with your line of interpretation, but it's healthy to use these things as tools for helping you understand the world. So, no, you're not crazy.

I think of the balloondogs, myself. A monster made from pure imagination. It's highly reflective of the phenomenon with anti-racists hunting racism: you have a person who believes racism is extreme and rampant, they look and fail to see it, but they don't change their belief, instead they look harder and eventually create the racism they wanted to find. Having monsters is a terrific way to control a population. "Don't leave the security zone of Home, citizen, or you will be faced with danger!" Though that setting's social engineering is so powerful that they don't even require monsters to keep the citizens in town.