Rhetoric and Logic

First things first, I alwasy start with my trusted Encyclopedia of Fairies by Katharine Briggs.

Briggs calls the kelpie "the best-known of the Socttish water-horses" and says that it "haunted rivers rather than lochs or the sea" and could "assume human form, in which he appeared like a rough, shaggy man" but that "his most usual shape was that of a young horse", which shape he uses to trick people into mounting him and then "rushing with them into a deep pool, where he struck the water wih this tail with a sound like thnder and disappeared in a flash of light. He was suspected of sometimes teaering people to pieces and devouring them." She also mentions that a kelpie sometimes has a magic bridle that can be stolen to gain power over the kelpie, or that putting a bridle on an unbridled kelpie might "subdue him to [your] will". (Briggs, 1976, Pantheon Books, p 246)

The each-uisge is called "the fiercest and most dangerous of all the water-horses" and Briggs states that it differs from the kelpie because it haunts "the sea and lochs, while the Kelpie belongs to running water". It can change into a handsome young man, but is most often seen as a "handsome horse" by whom everyone who dares to ride it "is carried at headlong speed into the lake and devoured". Notably the liver of the victim (and sometimes the heart and/or lungs) will later wash ashore. Examples of the each-uisge's powers are riders sticking to its back, it's back stretching to accommodate more riders. (Briggs, 1976, Pantheon Books, p. 115-116)

Alright, so far the only confusion might be that "loch" and "lake" are used for the each-uisge and that the kelpie goes into a "pool", not a river. But calling a loch a lake is a common anglicisation, and if kelpies live in rivers it's not unreasonable to find them in the pools that the river feeds. However, when I go to the books Briggs herself refers to (J.F. Campbell's Popular Tales of the West Highlands and G. Stewart's Popular Superstitions) it does not get more clear.

John Francis Campbell, in his largely orally collected Popular Tales of the West Highlands, originally published in 1862 in Edinburgh, considers the kelpie and the each-uisge as one and the same:

These shew that in the Isle of Man, and in the Highlands of Scotland, people still firmly believe in the existence of a water-horse. In Sutherland and elsewhere, many believe that they have seen these fancied animals. I have been told of English sportsmen who went in pursuit of them, so circumstantial were the accounts of those who believed that they had seen them. The witnesses are so numerous, and their testimony agrees so well, that there must be some old deeply-rooted Celtic belief which clothes every dark object with the dreaded form of the EACH UISGE. The legends of the doings of the water kelpie all point to some river god reduced to be a fuath or bogle. The bay or grey horse grazes at the lake-side, and when he is mounted, rushes into the loch and devours his rider. His back lengthens to suit any number; men's hands stick to his skin; he is harnessed to a plough, and drags the team and the plough into the loch, and tears the horses to bits; he is killed, and nothing remains but a pool of water; he falls in love with a lady, and when he appears as a man and lays his head on her knee to be dressed, the frightened lady finds him out by the sand amongst his hair. "Tha gainmheach ann." There is sand in it, she says, and when he sleeps she makes her escape. He appears as an old woman, and is put to bed with a bevy of damsels in a mountain shealing, and he sucks the blood of all, save one, who escapes over a burn, which, water-horse as he is, he dare not cross. In short, these tales and beliefs have led me to think that the old Celts must have had a destroying water-god, to whom the horse was sacred, or who had the form of a horse. (Campbell, 1890, Vol. I, p. lxxx-lxxxi)

He even reiterates in Volume II:" There is no word in Gaelic that could be corrupted into Kelpie, but he is the same as Each uisge." (Campbell, 1890, Vol. II, p. 207).

W.G. Stewart's The popular superstitions and festive amusements of the Highlanders of Scotland, first published in 1823 in Edinburgh, also groups them together:

WATER-KELPIES. In the former and darker ages of the world when people had not half the wit and sagacity they now possess, and when, consequently, they were much easier duped by such designing agents, the “Ech Uisque,” or Water-Horse, as the Kelpie is commonly called, was a well-known character in those countries. The Kelpie was an infernal agent, retained in the service and pay of Satan, who granted him a commission to execute such services as appeared profitable to his interest. He was an amphibious character, and generally took up his residence in lochs and pools, bordering on public roads and other situations, most convenient for his professional calling. (Stewart, 1851, Part IV, p. 101)

Stewart did his research primarily among what he called "the most celebrated professors of traditional lore" and he was possibly the first to attempt a somewhat comprehensive work Highland folklore. He includes a marvelous tale about a kelpie getting its bridle stolen, told to him by Mr. Mac Grigor Willox, a descendant of the tale's hero.

So far, then, we have Briggs who makes the distinction between the (water-)kelpie and the water-horse, and the two sources she cites who do no such thing.

However, looking at another source from around the same time, Superstitions of the Highlands and Islands of Scotland by John Gregorson Campbell—which was based on information he collected solely from oral sources between 1861 and 1891—does give the exact distinction that Briggs does:

The Kelpie that swells torrents and devours women and children has no representative in Gaelic superstition. Some writers speak as if the Water-horse were to be identified with it, but the two animals are distinctly separate. The Water-horse haunts lochs, the Kelpie streams and torrents. The former is never accused of swelling torrents any more than of causing any other natural phenomenon, nor of taking away children, unless perhaps when wanted to silence a refractory child. A Shetland friend writes: “Kelpies, I cannot remember of ever hearing what shape they were of. They generally did their mischief in a quiet way, such as being seen splashing the water about the burns, and taking hold of the water-wheel of mills, and holding them still. I have heard a man declare, that his mill was stopped one night for half an hour and the full power of water on the wheel, and he was frightened himself to go out and see what was wrong. And he not only said but maintained that it was a Kelpie or something of that kind that did it.” (Campbell, 1900, p. 216)

But it is very hard—and may be impossible—to tell whether the difference between a kelpie and a water-horse was universal in Scotland or whether it differed from region to region, or whether there never was a real distinction in oral tradition and it was applied retroactively by folklorists.

The only older use of the word in print that I've found so far is in Sir Walter Scott's 1802's Minstrelsy of the Scottish Border: Consisting Of Historical And Romantic Ballads, Collected In The Southern Counties Of Scotland; With A Few Of Modern Date, Founded Upon Local Tradition. In Three Volumes.

In Vol. I he mentions: "Shellycoat must not be confounded with Kelpy, a water spirit also, but of a much more powerful and malignant nature." (Scott, 1806, p. cxi). Vol. III includes a poem in "Lowland Scottish" by Rev. Dr. Jamieson of Edinburgh, meant to imitate "the classical compositions of our ancient bards". This poem has the kelpie coming out of a river and diving into a pool (which my Scottish does consider part of the river) and states that when someone drowns in a pool or river ford, it's sure to be the kelpies doing and that both rivers an wide waters obey the kelpie's law, from the very source of rivers down to the sea (Scott, 1806, p. 383-391). So while this kelpie is certainly connected to a river (the South Esk to be exact), it seems to imply you might well find one in a loch.

While the poem does not specifically describe the kelpie as a horse, it does say that if you manage to but "bit and bridle" on it, it will be forced to work for you, which does imply it is at least horse-like. In the footnotes Scott adds: "It is believed in Angus, that the spirit of the waters appears sometimes as a man, with a very frightful aspect; and, at other times, as a horse" (Scott, 1806, p. 392).