You're right that it's more of the latter! They won't leave a body behind, but you're welcome to play around with the circumstances of how they vanish; they can go "poof", or they can gradually dissipate into thin air, or they can fade and grow more intangible the more you hit them, or anything similar to that. You can take some liberties when it comes to physical signs of injury, though — if your character punches them in the nose with the expectation that the nose will break, it's fair game to say that the monster's appearance will reflect the expected damage.

That said, if the monster escapes with a "broken arm" (for example), there won't be one monster wandering the castle with a broken arm for the rest of the plot; the perceived injuries will last for the duration of the encounter, if that makes sense?

...I have no idea if that actually answered the question, but I hope it gives a slightly clearer idea? We welcome characters playing around with their monster encounters; the dreaminess of the plot leaves a lot of leeway for creativity, as you said!