Not sure if this source is real but I need help on verifying if it is true and whether this means that mermaids are real in Islam and permissible to eat.
This is jurisprudence not aqeedah. إنسان الماء (water human) is a creature which is mentioned in the rulings of food by jurists while their existence is neither confirmed nor denied in Islamic beliefs from the Quran or ahadith.
The general public at that time believed in such mythical creatures whose tales were brought by travelers and fishermen. The jurists would be asked about them and they would reply based on principles. They had no way of knowing whether the creature actually existed nor any reason to doubt it.
It is also possible that the name applied to some actual creature which had a passing resemblance to humans such as the Sirenia.