I think I may have found it in a jumbled mess from Archive.org. It's from a book named Aino Folk-Tales, by Basil Hall Chamberlain. It's said that he translated their lore to english. The story is called "The Island of Women."

In ancient days, an Aino chieftain of Iwanai went to sea in order to catch sea-lions, taking with him his two sons. They speared a sea- lion, which, however, swam off with the spear sticking in its body. Meanwhile a gale began to blow down from the mountains. The men cut the rope which was fast to the spear. Then their boat floated on. After some time, they reached a beautiful land. When they had reached it, a number of women in fine garments came down from the mountains to the shore. They came bearing a beautiful woman in a litter. Then all the women who had come to the shore returned to the mountains. Only the one in the litter came close to the boat, and spoke thus : " This land is woman-land, It is a land where no men live. It being now spring, and there being something peculiar to this country of mine you shall be taken care of in my house until the autumn ; and in the winter you shall become our husbands. The following spring I will send you home. So now do you bear me to my house."

Thereupon the Aino chief and his sons bore the woman in the litter to the mountains. They saw that the country was all like moorland. Then the chieftainess entered the house. There was a room there with a golden netting, like a mosquito-net. The three men were placed inside it. The chieftainess fed them herself. In the day-time numbers of women came in. They sat beside the golden mosquito- net, looking at the men. At nightfall they went home. So gradually it got to be autumn. Then the chieftainess spoke as follows, "As the fall of the leaf has now come, and as there are two vice-chieftainesses besides me, I will send your two sons to them. Yon yourself shall be husband to me." Then two beautiful women came in, and led off the two sons by the hand, while the chieftainess kept the chief for herself.

So the men dwelt there. When spring came, the chieftain's wife spoke thus to him: "We women of this country differ from yours. At the same time as the grass begins to sprout, teeth sprout in our vaginas. So our husbands cannot stay with us. The east wind is our husband. When the east wind blows, we all turn our buttocks towards it, and thus conceive children. Sometimes we bear male children. But these male children are killed and done away with when they become fit to lie with women. For that reason, this is a land which has women only. It is called woman-land. So when, brought by some bad god, you came to this land of mine, there were teeth in my vagina because it was summer, for which reason I did not marry you. But I married you when the teeth fell out. Now, as the teeth are again sprouting in my vagina because spring has come, it is now impossible for us to sleep together. I will send you home to- morrow. So do you tell your sons to come here to-day in order to be ready.''

The sons came. The chieftainess stayed in the house. Then, with tears streaming down her face, she spoke thus; "Though it is dangerous, tonight is our last night. Let us sleep together! "Then the man, being much frightened, took a beautiful scabbard in a bag in his bosom, and lay with the woman with this scabbard. The mark of the teeth remained on the scabbard. The next day dawned. Then the man went to his boat, taking his sons with him. The chieftainess wept and spoke thus: "As a fair wind is blowing away from my country, you, if you set sail and sail straight ahead, will be able to reach your home at Iwanai."So then the men entered their boat, and went out to sea. A fair wind was blowing down from the mountains, and they went along under sail. After a time they saw land ; they saw the mountains about Iwanai. Going on for a time, they came to the shore of Iwanai. Their wives were wearing widows' caps. So their husbands embraced them. So the story of woman-land was listened to carefully. All the Ainos saw the beautiful scabbard which the chief had used with that woman. — (Translated literally. Told by Penri, 17th July, 1886.)

So it would seem that the legend morphed some into the story of the steel phallus. And now we know the origins of hentai.

I've never seen a story proper, but I've seen it as an explanation of the festival a few times.

"The festival dates back to the Edo period (1603-1867). There is a famous legend among locals that explains the origins of the “Kanamara Matsuri”: Once there was a sharp-toothed demon who fell in love with a beautiful young woman. She wasn’t interested in the demon and when she decided to marry another man, the demon became very jealous. He inhabited her vagina the night before the wedding. That way the demon bit off the penis of two of her husbands. Everybody in the village was upset and so finally a blacksmith forged a steel phallus. With that they tricked the demon. His teeth were broken and he left the girl’s vagina. This eventually led to the enshrinement of the iron phallus and the Kanamara Matsuri."