Firstly, I forgot to mention this earlier, but before meeting the imp, the princess made a wish to the water crystal, which is kept in a room in her kingdom's castle. The legend surrounding it is that it can grant any wish, given time. Therefore, she wished to it that her she and her father could have a better relationship with one another. Upon meeting the imp, she decided to remain quiet about the water crystal, and thus wait to retrieve it, so that it would have time to grant her wish.
Upon returning to the water kingdom in the south, they discover a large pool of strange, harmful water extending from the kingdom. This is very odd, as it is the water kingdom's job to maintain proper water flow throughout the area. Upon returning to the castle town, the princess is met with strange looks; ones of fear, and townspeople retreat to their homes when she walks by.
At last she manages to get some info out of one of her oldest friends. This friend insists that the princess has turned cruel and harsh, treating the town with cruelty and unfairness. Even her father is rarely seen anymore. She apparently has become queen of the kingdom.
The princess comes to realize that the crystal seemingly granted her wish in a very twisted manner. The imp speculates this may be due to a negative magic being emanated by the king of the Shadow Kingdom. Apparently, the crystal spawned a cruel, alternate version of herself; one that seemed to want to better the relationship between her and her father by force! Thus, the real princess realizes she must infiltrate her former home, now under the command of her cruel doppleganger, and save the kingdom she was born to rule.
( As you may have guessed, this was inspired by the Water Temple mid-boss, Shadow Link, form OoT, that is, the relationship between a mirror version of oneself and water. )