Well, there actually totally is a city inside the moon ruled by an immortal princess. Buuuut it's really rather on the complicated side. I'll give the short version that omits some of the stranger details. ^^;

See the moon bunnies were the "original" inhabitants who were actually created directly by Tsukuyomi in order to tend what was effectively a giant divine supercomputer inside the moon. That got destroyed, and in an accident Tsukuyomi brought a ton of her(I make Tsukuyomi a girl for some reason every time I use the deity for something) followers into the moon. Now it's a city, and the moon bunnies work as attendents and spies for Kaguya-hime, who likes sending them down to earth to "spy"(tell her neat things going on down there) for her.

They're all-female, deliberately created youkai who are inherently possessing of skills with illusion spells.