Its design matches almost perfectly with the legend of the cocollona, a nun who slowly morphed into a crocodile monster with butterfly wings. It's a myth that originated in Girona, Spain, so it's not impossible that Game Freak would have been inspired to make it into a Pokémon after picking up on the story from one of the higher-ups' customary field trips. The wings specifically seem way too specific for it to be a coincidence, although it would be funny.

This is all of course assuming the design is real, although it wouldn't be surprising that it was the still the inspiration even if it's fake. Whoever made it did some actual research, either way.

>Why is a river monster a Fire-type starter?
I don't know. Ask Game Freak or whoever else made it.