Adrian, you were overthinking this. That was Lydia's secret. She never overthought anything. Some (many) would argue she didn't think enough, period.

"It's...the sea," Lydia said, unsure why he was having difficulty with all of this. "And Wormentongue used to be a dragon, you see, so it would have been a very bad thing for everyone if he'd managed to restore himself. And Miss Lambe is the Witch Queen of Brighton, so of course she must be of Brighton." Duh, Adrian.