There are two things I know of that can make Merfolk premades & game created townies show their true form in Sulani. One of them does involve the "ordinary' seashell. You were close, but there has to be Merfolk on the lot or close to it when your Sim blows the call. If there is Merfolk nearby, they'll come over and do their little derpy dance and dolphin sound. After that happens, your Sim can ask them why they did that. It's in the socials somewhere, just click on them and look for it.
They'll say something about it being something they do to show respect for their people, it's their song and admit to being Merfolk. After that, next time you see this Mermaid/Merman (or any Merfolk) in the water, they'll have a tail and swim the way they should as Merfolk.
The other way is one of your currently played Sims must be a Merfolk, either created that way or by eating one Mermadic kelp. Mermadic kelp can sometimes be found in the cave with the graffiti next to it. Or if your Sims have enough Satisfaction points, they can buy Mermadic kelp for 500 points.
One thing you should know about becoming Merfolk with Mermadic kelp. Your Sim must go in the ocean before the moodlet that says something like, I feel funny and have an urge to go in the ocean disappears. If they don't go in the ocean, they won't turn into Merfolk. Hope this helps! :)
EDIT: BTW, there's a lot of things Merfolk can do, probably more than I myself know since I just created a Mermaid myself and haven't explored everything yet. I'm sure there's lots of videos about TS4 Mermaids though on YT and doing a search in the forum would probably yield a lot of information too. :)