To sum things up:

• The Nadir is full of Imaginary Purple (called Irrigo) that erodes your memories. Stay long enough and your skull closes over your eyes to prevent this from happening (it doesn't work). Eventually you forget so much that you no longer remember how to leave. Soon after, you no longer care. Then when you've lost all sense of identity the Nadir begins to erode you flesh instead.
• Millicent Clathermont fell in love with the Bazaar but recognised that it's a monster. Not being willing to live with this cognitive dissonance (I can't believe this, but I MUST believe this, but I CAN'T believe this), she did something with tattoos(presumably?) to make sure she would forget ONLY the parts of herself that couldn't love the Bazaar. She directs you here during SMEN which implies it was planned and deliberate.
• The Millicent you see here is the memories she removed from her original self. A sort of dream/memory/reflection of who she used to be.