New Idea About CrimsonWood and Pirate Patch

I want to say mermaids since the city has been underwater for some time.

Well, you need to keep in mind Corine is talking about what happened over 1,000 years ago, before the island sunk, and that Foxwit is talking about what's going on now, after the island's arisen. Whatever they are they must be capable of walking on land, and they live deep in the jungle, which is pretty far from water (aside from that river.)

Don't they still drop? o.0

The only use item from last halloween that still drops in the mansion is Smores, because they're needed for that quest. Gummy Slimes, Pumpkin Taffy, Heartstoppers and so on don't drop right now.