It makes perfect sense, on the contrary. It's your viewpoint that doesn't. You're basically saying that Karstaag is nothing else than a malformed human.
The Sphinx that Oedipus met was a monster. The Erinyes (or Furies), born from the blood of Ouranos, are monsters. The Tarasque is a monster. All of them can talk, according to their myths. All of them are fairly intelligent as well. But they're all monsters, that is their identity and their function.
You're getting completely caught up and mixed up in the many definitions of monsters. I did say I wasn't talking about the moral definition of a monster (such as Pol Pot, to give a less clich? example than Hitler), but the mythological one. And Karstaag is just that.
Between the two arguments, my support goes to Gez. I mean, if I were a common Nord chillaxin' on Solstheim and I happened across some blue, twice-my-size, horned thing, I'm not going to contemplate it and think to myself, "Say, that is probably an intelligent, malformed human". No, I'm most likely going to yell my bloody head off and think, "By Ysmir, it's a MONSTER!!"
That is why I agree with Gez.
What is their basis then, strictly physical appearance?
yeppers. That and the lack of information on Karstaag. In the past, things like bats have been associated with evil rituals, etc, because people only saw little animals flying thru the night sky. Once people understood what bats actually were, the notion that "bats=evil" disappeared.