In trying to think up a style to draw the Baku in, that is suitable for children, I couldn't help but think of Jon Klassen, who is now tied in first place for my favourite children's illustrator along wtih Chris Riddell. I have only discovered the large majority of his work recently, but I am absolutely in love with it.
http://www.burstofbeaden.com/
Things I would like to take from this are the textures, the colour schemes, simple shapes, and the translucency. The nightmare-ish creatures would look amazing slightly translucent. Things I would add, for my own style and the story, would be a slight Japanese or Chinese influence, and more detailing.