I think the confusion with Shuixian and “Water Sprite” probably comes from the meanings of its individual characters. When the two characters are together, the word refers to the flower. Interpreted apart from this, the two characters have the individual meanings of “water” (水 shui) and “immortal” (仙 xian). This reading of “water immortal,” although more colorful, is not really correct when the two characters are together.
Besides all of this, an immortal is not really a fairy, so it would still be a pretty bad translation. An immortal in Chinese culture is kind of a sage who has cultivated the Dao, and can live for thousands of years, ascend to the heavens, vanquish demons, help the ordinary people, etc. When living in the world, they often reside in the mountains and caves, away from society. Although unrelated to Shuixian, there is a wulong tea that is actually named after the immortals: the Baxian (“Eight Immortals”) Dancong.
