Kakashi could also be a main character. He could be the one who has to deal with Naruto's failure in a different way than Iruka. Maybe he has to decide if Naruto is worth another chance. Also, Sakura could be involved. She might initially be disappointed in Naruto but then realizes that there is more to Naruto's failure than meets the eye and tries to support him in her own way.
Well, one possible plot could be that Naruto fails the test due to his overconfidence. He might rush through the practical parts without properly showing his skills. For example, in the clone jutsu part, he could create clones that are too obvious and lack the finesse required. This would then lead to him having to face the disappointment of his peers and his own self - doubt, which could be a major part of the fanfic as he tries to overcome it and prove himself.
It could be someone from within the village who doesn't want Naruto to succeed. Maybe a jealous rival among the other genin candidates. This person might have set up some sort of trap for Naruto during the test, causing him to fail.
In such a fanfic, perhaps Naruto is overly nervous during the test. Maybe he fails the written part because he didn't study enough about basic ninja knowledge. For example, he could mix up different types of jutsu classifications. Another possibility is that he fails the practical part. He might lose control of his chakra while performing a simple jutsu, like the Clone Jutsu, which is crucial for genin. This could lead to him not creating enough clones or creating unstable ones that disappear quickly.
Sasuke could be one of the main characters. He might be initially skeptical or even hostile towards Naruto's mermaid side, but as the story unfolds, he could come to understand and support Naruto. Another character could be Sakura. She could use her medical ninjutsu skills to help Naruto if he gets injured during his underwater adventures.
Samul, of course, since he's Naruto's supposed father in this fanfic. He could be a powerful ninja who had some great influence in the past. Another character could be Naruto's mother, who might have a different story now considering her relationship with Samul. Also, characters like Jiraiya could still play an important role. He might be the one to guide Naruto in understanding his new identity as Samul's son and help him train to face the challenges that come with it.
Hinata is also a likely main character. In the original story, Hinata has a crush on Naruto. With Naruto being a smooth operator, he might notice Hinata's feelings more easily and their relationship could develop in a more romantic and interesting way. Kakashi could also be involved. Naruto could use his smoothness to learn new jutsu from Kakashi more effectively or to get Kakashi to trust him with more important missions.
It could also focus on some of the other Genin like Rock Lee, Neji, and Tenten. Their unique fighting styles and stories could be explored more deeply in the fanfiction.
Besides Naruto, Yugito Nii could be a main character. She is a jinchuriki in Kumo, just like Naruto is in Konoha. They could bond over their shared experiences of being hosts. And there could be some of the Kumo elders who play important roles. They might be the ones who oppose Naruto's entry at first, fearing he could bring trouble, but then as they see how he can contribute to the village, their opinions change.
Well, a Lucario - girl would be a great addition. Lucario is known for its strong fighting and sensing abilities, so the Lucario - girl could be very perceptive and a great fighter. There might also be a Gardevoir - girl. Gardevoir is very elegant and has strong psychic powers. She could help Naruto understand the psychic aspects of the Pokegirl world and be a valuable ally in battles and in deciphering the mysteries of this new adventure.
The street kids themselves would be main characters. They could be a diverse group with different personalities and backstories. There might also be Naruto's friends like Sakura and Kakashi who could play important roles. Sakura could help with the kids' medical needs, and Kakashi could offer his wisdom in training the kids.