This was such a nice read!  I absolutely loved the idea of the mermaids and the myths behind them!  Let's also pretend this story is on A03, and I just hit the kudos button like a half-dozen times.  

The thing I liked most about this?  The way you explained the myth and made it your own and explained it really really well.  I had this image of a small coastal town with the cove built up in my head, and it was beautiful!  And then Naraku as the male mermaid?  I totally did NOT see that coming.  I thought he was just some mermaid hunter at first.  The scene with the escape-I'm glad they escpaed safely. 

It's kind of nice that they ended up moving back, though the family did have to be split up a bit.  And the ending: I laughed at that last line becuase of course, the prophecy would be about Shippo.  

Great story!  

* The only big error I noticed was this, and I'm only pointing it out because if I made that mistake, I'd like if someone pointed it out to me.  You wrote: “When we spawn we shed the tail to make it earlier, to you know”  and I'm pretty sure you meant to use the word easier instead.  

Anyway, great story!  And I loved reading it :)