I've finally located the original story of the dancing giant in Torquemada.
http://www.historicas.unam.mx/publicaciones/publicadigital/monarquia/volumen/01/02Libro%20Primero/miv1029.pdfIt's too long to quote entirely, but here's my summary (I'll quote some of it):
The story is about the destruction of the Toltecs, who had been persecuted and oppressed by a certain king. Believing the persecution resulted from their "having angered their gods," all the Toltec priests, princes, and lords gathered together in Teotihuacan to have a "fiesta" to please and placate the angry gods.
In the middle of the fiesta, a demon appeared in the form of a "great giant" (described as appearing in a "sudden vision") and began to dance with them. They were afraid of the giant because it was "too large and deformed, with long and thin arms." Believing the giant had been sent by the gods, they turned their faces to him. As he danced with them, "he began to embrace them in his arms, and as many as he caught between his arms (like another Hercules did to Antaeus) he took their lives, sending all of them surely to death."
"Another day, the demon appeared again among them in the form of another giant with long and tapered hands and fingers." This time, he pierced them with his long, tapered fingers and hands, thus killing them.
"At the end of the festivities, the same demon appeared to them on a tall hill ... in the figure and form of a very beautiful and white child seated on a rock and with all of his head rotten/decayed, and many people died from the stench that came from [the head], as if wounded by a mortal and venomous poison." The Toltecs tried to capture the child and drag him to a great lagoon to drown him, but he was too strong for them. While they were trying to capture the child, the demon appeared again and told them they must leave the land if they wanted to save themselves from death, ruin, and calamities.