When I was younger, I was also afraid of stalchildren instead of stalfos! The stalchildren pop up everywhere you go, and you can constantly hear them scratching! The stalfos kinda look ridiculous.
Maybe the redeads dance because they were used as slaves or entertainers in their previous life?
Is it really mourning? or lunch?...
I personally wasn't SCARED by the wallmasters, just pressured. The hag from the lake observitory also creeped me out... her crooked jaw was disturbing.