My guess : drinking the water from the lake gives pseudo-mermaid features to people, like the eyes. It doesn't extend their life. Some of them react stronger than others and get more mermaid features, like teeth, craving for flesh, scales and they become "houkos", that Chitose takes care of, some way or other.
What's in the water should be the blood of the real mermaid, that's been sunk and trapped centuries ago at the bottom of the lake, and that's the "mermaid disease", or curse the townspeople have, with a difference in degree (houkos are still rare). They pay for their sin of trying to kill the mermaid (we don't know if the mermaid really ate someone).
Concerning Chitose, it's possible that she actually ate, a long time ago, some of the flesh of the mermaid instead of just drinking water. Which led her to become mostly immortal and be closer to a mermaid than other people, but still an "incomplete" mermaid, utterly lonely.
