Overall, LAMB is a problematic album for me. On the one hand, the music is incredible, with the band at or near their peak. On the other hand, the story -- however cleverly told in the lyrics -- just doesn't do much for me. At best, it's surrealistically strange in a way that doesn't quite capture my imagination. At worst, I find it rather unappealing. "The Lamia" may be the one track that best represents my mixed feelings toward the album.
On another note: LAMB gives me the impression that the listener is invited to come up with their own interpretations of it (though I'm sure this was not Peter's intention at all). Given that, I have my own interpretation of it which (1) is not thoroughly thought out, and thus is subject to variation; and (2) is not anything I would attempt to convince anyone else of. Part of that interpretation is this: that certain parts of Rael's experience/hallucination/drug trip/whatever are symbolic of various past events in his life. In the context of that, the Lamia/Slippermen sequence would represent a set of circumstances that was not, shall we say, the high point of his life.