Yay or nah

Yay

Considering they are both ‘onryo’ I would be surprised if she didn’t come in as a skin for Sadako at the very least at some point, but would be cool to have her as a separate chapter or killer and have the power act differently.. problem is, it might be difficult to implement - any ideas you have for how the killer would play or thematically operate?

I would be surprised if she didn’t come in as a skin for Sadako at the very least at some point

Except for the fact that two different licenses cannot be mixed together, same reason why Vecna from Stranger Things cannot be a skin for Vecna from Dungeons & Dragons.

Even then, Kayako absolutely needs to be her own character, as Sadako and Kayako are the equivalent to Freddy and Jason over in Japan.

any ideas you have for how the killer would play or thematically operate?

Pretty easy actually.

• Toshio as an AI assistance to Kayako that helps her finding and detecting Survivors which allows Kayako to teleport to his location with undetectable.
• Kayako's death rattle at it's least intense being her lullaby or part of her terror radius.
• Kayako's sprint crawling as her special attack with her death rattle being at it's most intense when she attacks Survivors with it.

That's a Sadako power, not Kayako, as Sadako does that in later films such as in Sadako vs Kayako (and possibly also in Sadako 3D i think).