You may be right. Though funnily enough, I actually think a lot of the acceptance of the Mari Lwyd in recent years is actually because of her being seen as Weird and Other, in counterpoint to your last point - that's why people like her. And like... sure, she is weird, I guess. But in a very mundane "now let's get drunk" kind of way.
I think it possibly varies by case - for example, as I say, I actually do love a lot of the Mari-Lwyd-as-cryptid art, I recognise that it's an evocative image, and it's fun to explore. One of my favourite pieces is this one:
Here's one from Shoggoth.net, where she is literally a cryptid:
And this is a fairly common motif:
And to be clear - I love all of these! These are great!
But equally, each of these is part of this overall make-her-a-cryptid trend. She's a creature in her own right; she's sinister; she represents the creep of untameable nature, the dead come to life, something that wants to get in. She has antlers in that last one, something horses do not have, but they feel... idk, correct? This is evocative of the Old God imagery, so she gets antlers. I have seen many antlered Mari Lwyd pieces at this point. It's a semi-common theme.
And if you google Mari Lwyd images, or even if you look in the Tumblr tag, this is the kind of artwork you get. Ancient, wild, untameable, sinister, thing-that-wants-to-come-in. It's fun! I do enjoy many of them!
There's a Welsh artist, Clive Hicks-Jenkins, and he has produced some amazing Mari Lwyd art over the years. Some of that is sort of cryptid-like, too. But he grew up as a child afraid of his dad doing the Mari and having nightmares about it, so is coming at it from an insider perspective, and I think you can tell. Most of his pieces make the human component clear:
And I think even the more nightmarish and abstract ones still, at their core, retain the idea that this isn't a magical creature from the woods of Annwfn but something constructed out of an actual horse and actual people:
Compare that to most of the Mari Lwyd art on Tumblr, and it's all "dark and wild creature representing the Old Gods"; because that's increasingly how she's known and seen.
And like. It's a hedonistic pageant figure who wants cheese and fun. She's not here to eat your children. She's here for fun and also fermented produce to get her bladdered. She is supposed to be silly. Her attendants - never mentioned, by the way, that's another thing - are fucking Punch and Judy characters. The pwnco isn't high art, it's not a faerie spinning riddles - those insults become "So's your FACE" type insults. It's supposed to be ridiculous, and stupid, and fun.
So it gets weird to me when people present her as a Dark Christmas alternative. Not appropriation necessarily? But certainly projection; she looks like an Old God kind of figure because she has a skull for a head, and she sings to come in, and if you phrase it like that, it can sound sinister and therefore like a very familiar type of aesthetic. I suppose it's then easy to project that aesthetic on, without even realising it. Plus, I think a lot of people like to try to reject the trappings of Christian culture including the iconography - things like Krampus and Mari Lwyd seem to run counter to them, so they get gleefully seized upon as anti-Christmas icons.
That said I would legit be much happier with all of the Sinister Old God shit if every artist who did it wrote the words "Wel dyma ni'n diwad gyfeillion diniwad, i ofyn am gennad..." in the air around their cryptid to include the Welsh. Like, that would genuinely go a long way to help the issue. Still weird! But much more respectful.
This is getting away from me! I shall finish by showing you all the absolute best Mari-Lwyd-as-cryptid art I have seen recently on Tumblr, though, which is this one: