I don't think it's possible to answer this question clearly without a lot more context. The speaker seems to be talking about some specific type of seizure (presumably associated with a particular disease or condition). Apparently these seizures produce some kind of visual imagery (or something similar) that have some of the qualities of a "memory," but also some "dreamlike" qualities. Apparently, some people (doctors? psychologists?) used to think that the seizures were real memories, but the speaker here says that they also have "dreamlike qualities," which suggests that they are at least partly imaginary. I assume that the rest of book you're reading gives more information about what kind of disease or seizures the patient experienced. It sounds like the person's seizures involved "seeing" a certain village (presumably a real village, partly remembered and partly imagined in a "dreamlike" way). "Organic malady" probably refers to the fact that the person has a malady (a disease) that is physical (organic) -- there is something physically wrong with him (not just psychologically wrong).