If it is nothing more than "generic monster cooked up for bad B movie", I can settle for that. Please provide an explanation of how it can only be such.
If there is more to it (and the characters do hint at it in a few places in the movie) please explain it.
Wikipedia says that the thing is a member of a genus of sea worms, but this thing has eyes, a beak, and tentacles which, apparently, have mouths at the end. I do not think this counts as a general reference, since it clearly cannot be correct.
And don't even get me started about the island at the end.
No good images are available of the boss creature, but here is the best I could find (second image down). The head with the eyes is roughly the size of a small apartment.
Izkata also found these pictures of the smaller ones.