Her sprite in DDC has distortion and ripples from the waist down (i.e. her whole tail is submerged), so this seems unlikely.
puush will do until I get a more reliable image hosting
It's a kind of strange pose (she's sitting...?) but I think it's supposed to look like she's floating, rather than hovering.
Then again, they could make underwater stages (it's probably not too much of a leap to go from aerial to submarine fights, maybe making movements a bit slower or somesuch) and apply the same restriction that Remilia had in IaMP/SWR/Hisoutensoku (can only fight on night or indoor stages). That'd also be a good excuse to include, say, Murasa. But... it seems kinda unlikely. Wakasagihime is stated explicitly not to have a combative personality (so no real motivation to get involved, unlike, say, Cirno in Hisoutensoku or Remilia in SWR) and she doesn't really have mobility (as stated, she doesn't have legs, for starters, and it's not clear if she can really fly, besides she seems to be quite weak out of water).
The backstory, however, mentions urban legends in relation to children. It might be a bit of a stretch, but maybe that'd be a good reason to include at least one character known for being childish to the roster, maybe propagating those rumors, for example. It could be Cirno, since she's already appeared in a fighter and has appeared in recent games (12.3-12.8-14-14.3) or Sukuna, since her mallet could actually have influence in a "urban legends becoming real" kind of incident. Just a bit of speculation for fun.
I wouldn't be surprised Wakasagihime makes it into the game after hearing that. Also, we can expect Remilia :V playable because of a popular rumor which has been mentioned here and i believe Youtube as well: Chupacabra ( or however it's pronounced ). Speaking of a playable Remilia, she would have the sunlight limitation in which she can only fight in x number of stages. Playable Shinmyoumaru Sakuna... :V i would love to she how she would play like, i agree with you here honestly
the Miracle Mallet has the potential to cause Urban Legends to become real. Here are my expectations for Touhou 14.5 Urban Legend in Limbo character roster:
Confirmed Characters: Reimu , Marisa, Kasen and ? ? ?
Possible Characters: All of HM cast, Wakasagihime, Seija, Seiga with or without Yoshika, Suika, Maybe Shinmyoumaru Sakuna, Remilia, Yuugi, Kaguya, Mokou, Eirin
But in terms in Urban Legend wise...
Confirmed Characters: Reimu, Marisa, Kasen and ? ? ?
Possible Characters: Yuugi and maybe Suika, all of HM cast, Remilia, Wakasagihime, Seiga with or without Yoshika, Seija and maybe Shinmyoumaru Sakuna, Eirin or Reisen or Medicine