Melville is totally playing with his readers, on multiple levels. Not only are we left to contend with crazy content, but the text itself also demands that we engage in some serious mental acrobatics if we want to follow Melville's exercise in showing off his writing chops.
Where he could use one word, Melville uses twenty. Where he could be plainspoken, he uses erudite conceits. Basically, the dude breaks all the rules of the realist handbook, and most style guides (e.g. William Strunk and E. B. White) would have a field day editing this stuff down.
It's not just enough to have your dictionary handy. To really dig into this, you'll probably need to back up and track Melville's allusions in the middle of his already complex chapters—where you might find yourself in a story within a story within a conversation within a narration that is kind of a joke. To get a sense of how complicated and wordy Melville's style can be, check out this one-sentence paragraph (yes, one sentence):
As, in gaining his place, some little perseverance, not to say persistence, of a mildly inoffensive sort, had been unavoidable, it was not with the best relish that the crowd regarded his apparent intrusion; and upon a more attentive survey, perceiving no badge of authority about him, but rather something quite the contrary—he being of an aspect so singularly innocent; an aspect too, which they took to be somehow inappropriate to the time and place, and inclining to the notion that his writing was of much the same sort: in short, taking him for some strange kind of simpleton, harmless enough, would he keep to himself, but not wholly unobnoxious as an intruder—they made no scruple to jostle him aside; while one, less kind than the rest, or more of a wag, by an unobserved stroke, dexterously flattened down his fleecy hat upon his head. (1, 6)
The thing is, we're pretty okay with how complicated this text is. Melville does what he does well. His intricate sentences, big words, and big ideas are working for him—and he knows it. This text is as much a challenge to himself as it is to us. It's also hilarious once you get the hang of it.
Melville is trying things out and putting on an ambitious show. His elaborate style doesn't let up even when he addresses the reader about his writing choices. As his audience, he expects a lot from us because he's putting time, effort, and consideration into each word.