Alright so, I read on here that to get the second dragon princess you have to pick hard mode (warm stone I think) for the tutorial, put absolutely no points into intelligence whatsoever, get nuked by the second dragon princess near the very beginning of the game after the tutorial, then finally put five points into intelligence.
Now here's what I'm wondering. Are there any other characters that have secret unlock conditions like the second dragon princess? Like, can you even get the kobold princess if you don't pick her easy mode (red candle) during the tutorial? I just don't want to miss anything. Maybe someone could update OP's post with all the secret unlock conditions for the various characters if there's more than just the second dragon princess that needs unlocking.
That's one way. You could also just head over to her castle (if you know how), sneak past her guards, and talk to her.
LamiaP has unlock conditions, MimicP has unlock conditions, I think you can bone Amelie if you complete her quest, FairyP has a quest...the simple answer is yes, that this game has plenty of secrets and progression-dependent content that isn't always easy or straightforward.
I never figured out how to go through GhostP's content and wound up just using cheats. I still don't know how you're supposed to get Cogs after gathering whatever's at the battlefield by GolemP's tower. I don't know what KoboldP's bad end is or how you get to it. I have no idea what Don Medulla's after, or what FrogP's pond water really does.
To answer your first question, though, KoboldP's candle just means she tags along with you in the intro--she talks to DragonP I (Hilda, the red dragon) and you can swap her out with your knight to use her abilities to fight bats or the snake. If the candle is related to her good or bad ends, I'm not aware of it.