When I interpret this portion of the story I believe the author is trying to reveal to us Kvothe in his full powers as Ciridae. The passages are designed to be brutal to modern sensibilities because it does involve the concepts of Judge, Jury, and Executioner. Now in his Ciridae persona he must come to the realization of what he has become. This takes place in the conversation with Gran the healing woman. She knows the turning of the world.
The second interpretation is that Kvothe is visualizing, through his own eyes, the killing of his family. His vision is not from either side, or a distance, or above as a witness but through his own eyes face to face as the killer. He can also hear what is said during the course of the killings. In the original passage as a child he sees no blood on Cinders sword but in his memory of the false Ruh killing there is blood on CInders sword. He would have had to be present holding the sword or how would he have known what happened prior to his arrival at the scene?

Way back in time when I was a girl watching a movie with my Dad (b&w TV) there was a scene where a man watches another man fall backward from a high skyscraper window and splat on the ground. Only, in his first vision, it was a watermelon. As he had more and more visions over time it morphed into a falling man. My Dad predicted that he had done the crime because he saw the first man witness the crime though his own eyes and there was only one way that could happen. This is exactly what I thought the first time I read about the false Ruh killing in the book.