Awesome. I like the idea of a wandering Shepard minigame, and I like Lithe's personality, that she's kind of a bitter, yet removed, old lady. Two things I'd like to consider, though:
1) Being a demon: I don't have any problem with there being demons in the Zelda universe, the thing I'd like to consider though, is that she's the only demon, and it kind of brings up a bunch of questions unnecessarily, as for her function, there is no real reason or advantage for her to be a demon instead of an established race such as a Zora or Goron.
2) More about the minigame, actually, it we'll have to make sure there's enough space for her minigame in each of these areas. But what's the advantage of having her move around instead of staying in one place? Will there be different rewards depending on where she is, or will playing the game in ever location do something?