Well, to resolve this, I've begun work on a new magical spell. After I've created a mermaid, I will report back.
For the gnomes, that is a good point, at least for 2e and later, in 1e, gnomes couldn't be magic users. Bugt, Gond rewards those who come up with new technology, you would think that there would be all kinds of new inventions. As a DM, I've dealt with this in a couple of ways, including ignoring the matter, but also including there being other powers at work that stifle the new inventions, or hide them away (kind of like the arc of the covenant at the end of the first Indiana Jones movie.)
When it comes down to it, as a player I would accept either kind of mermaid and do it with a smile if the DM had an answer for why they were that way.
I just prefer the vertical aesthetically.
(Maybe I like it b/c it's the opposite of 'My Little Mermaid' and 'Splash' [the movie with Daryl Hannah].)