A youtube video may help alot. I am trying to determine if this is indeed fungal or if it is lymphocystis as Pasfur suspected. With photos that are sort of fuzzy and not crisp, it is difficult for me to determine, but treatment would be extremely different if its one vs the other, so I want to be as sure as I can be before I offer any suggestions to you.
If you can include photos and/or video of the damsel as well, that might also help. I apologize for the length of time it is taking to diagnose this problem, but I do need to be more sure of what exactly is going on. This would be much easier if I could examine the fish in person, but via internet, sometimes simple things become near impossible.
One last question, and I'm sorry if it feels like I am repeating myself... the appearance of these lumps... is it smooth and cotton like or is it fuzzy/furry looking? I'm not sure if that makes sense to you or not... but its the best way I can think to describe the differences I need to know about before we proceed. In lymphocystis some people describe it as a cottony growth, but it is actually smooth, almost waxy in texture and substance, and is solid. With fungus growth it is more like fur, fuzzy in appearance with fibers to it, typically only visible via microscope, but it is not smooth or solid. Think of mold growing on a slice of bread or a brick of cheese... that would be fungal.
I will check back in here when I wake up, I need sleep now, its after 5am.