I saw one in elementary school — a mermaid. But it wasn't some fairy-tale story.
Literal
I [topic-は] elementary-school [possessive-の] time saw [explanatory-んだ], mermaid. But that-kind-of fairy-tale-ish story [not-じゃなくて].
The 倒置法 (inversion) places 人魚 ('mermaid') after the verb 見た, creating a dramatic reveal — 'I saw one... a mermaid.' メルヘンチック ('fairy-tale-ish') is a Japanese coinage from German Märchen ('fairy tale') + the pseudo-English suffix -チック (-tic). The shift from mysterious to deflating ('but it wasn't like that') builds narrative tension before undercutting it.