I am reading books and looking through the web pages to find a god myth or legend I can base my story on. However I did not find a story which would be suitable for me about mer people, but found more interesting creatures I might can work on, they are quite similar to mer people though. I think if I select any of these three it would give me more freedom to create good character design as well.
Blue men of the Minch
These supernatural sea creatures were said to live in underwater caves in the Minch, a straight between Lewis, Long Island and the Shiant Islands near Scotland. The Blue Men looked like humans with blue skins. They where infamous for swimming alongside passing ships, and attempting to wreck them by conjuring storms and by luring sailors into the water. If a captain wanted to save his ship he had to finish their rhymes and solve their riddles, and always make sure he got the last word. The Blue men were actually hierarchical, as they were always ruled over by a chieftain. This led to the assumption they are somehow related to mermen. Some think the Blue Men may be Fallen Angels.
Bunyip literally means devil, or spirit. It is a mythological creature from Aboriginal Australia that was said to lurk in swamps, creeks, riverbeds and waterholes. Aborigines thought they could hear their cries at night. They believed Bunyip took humans as a food source when their stock was disturbed, preferably women, and they tended to blame the Bunyip for disease spread in the river area. Bunyip supposedly had flippers, a horse-like tail and walrus-like tusks. It is now said that Bunyip are a figment of Aborigine imagination, because the cries they heard actually belonged to possums, or koalas. The cries of women supposedly being captured may actually have been sounds of a barking owl.
According to Scandinavian mythology, Fosse grim was a water spirit that played enchanted songs on the violin, luring women and children to drown in lakes and streams.
As well some interesting places:
In the Atlantic Ocean a triangle-shaped area between Bermuda, Puerto Rico and Fort Lauderdale, Florida, in other words known as the Bermuda Triangle. The area is nearly a million square miles wide, and extends from the Gulf of Mexico to the Caribbean Sea. A series of mysterious disappearances of ships and planes has surrounded this location with insinuation and myth. People claim that in this area the laws of physics are violated, and it was even suggested there is extraterrestrial activity there.
The Underworld is a mythological realm of the god or goddess of the dead, where the spirits of the deceased stay
Mu was a continent once located in the Pacific Ocean that is believed to have sunk into the depths of the sea. Monsieur A. Le Plongeon derived the idea of Mu as a continent from ancient Mayan writings.
S.M. Enzler, (unknown) 'Water Mythology' [online], http://www.lenntech.com/water-mythology.htm [accessed 09/06/2012]