The baby monsters, which appear from level 10 onwards, behave strangely (and there are hints in the original code that they were originally thought of as "spirits"). They can travel over earth without consuming it, and can end up on top of boulders, arrows or balloons. They can also end up on top of each other, and there can occasionally be three or more at the same place.
So what about the design idea that there should be only one object in each grid cell? Only one entity is visible in each cell, and only the visible entity can affect the behaviour of other entities. Each cell could contain a pile of entities, with only the top one visible, but the actual mechanics of the game make the ordering of the entities in the pile irrelevant. For example, when a baby monster goes off the grid, it is the non-baby-monster entity underneath that becomes visible, not one of the other baby monsters. This makes it reasonable to stick to the convention of one entity per cell, and treat invisible entities as being temporarily off the grid. It turns out to be sufficient for a visible baby monster which is on the grid to remember which (non-baby-monster) entity was underneath, and for an invisible baby monster off the grid just to remember where it was.
The dynamic behaviour of the baby monsters is explained by the following details. First, the player moves (and perhaps the big monster), and all the ensuing triggered events happen. Moving entities (boulders, arrows, balloons) stop if they hit a baby monster. After that, each baby monster gets a turn to move. It uses a left wall following algorithm (i.e. it moves as if keeping its left appendage against the wall) and it can walk over earth. When it has moved, it becomes temporarily invisible, and triggers nearby entities (thus sometimes allowing a moving entity to seem as if it has passed straight through). While the triggered events happen, moving objects completely ignore invisible babies, but are stopped by visible ones. After that, the baby monster makes itself visible again (which may leave it on top of a moving object which happens to have stopped in the baby monster's grid cell).
There is a further strangeness in the behaviour of baby monsters. If a baby monster is trapped in a single cell so that there is nowhere to go, it will move anyway, on top of one of the surrounding entities. This behaviour has been partly duplicated in the reconstruction, because it is essential to solving some of the later levels (level 50 for example). However, it causes problems elsewhere (e.g. level 41) because a baby monster may end up moving entirely off the playing area (and that can actually happen in the original game). Rather than allowing this, which isn't essential to solving any levels, the reconstruction does not allow a baby monster to move on top of a wall entity.