2/ This kind of story has a lot of precedence - in old Germanic beliefs, the "afterlife" of the departed was not in some distant dimension, but beneath the hills and mountains where they would carry on with their "lives". And remnants of this belief are widespread - in this tale from Styria, the distant ancestors of the modern-day inhabitants likewise still lived within the mountains of the region.
https://wiki.sunkencastles.com/wiki/The_Ghosts_of_the_Old_Noricans