I haven't done much of the Summerset chapter still (I am taking my time), so I am not yet aware of all the new lore, which might very well contradict (or trivialize) what I am putting forth here...

So here I go.

I was closing one Abyssal Geyser yesterday, and heard K'Tora's voice taunting us players, saying something about the source of the Yaghra being infinite. So it kind of dawned on me: Yaghra are like Daedra. Except they are Nirnian Daedra. I should probably explain how I came to this.

The crux of my realization was that they come from water. They actually "materialize" from water. Pretty much like Molag Bal's minions materialize from Azure Plasm or Mazken and Aureals reform from their respective Wellsprings.

Each Daedric plane of existence seems to have its own type of Chaotic Creatia, that acts like some "blood" for the capillaries of the realm. In Coldharbour, it's the Azure Plasm. In the Shivering Isles, it seems to be the fluid colour, that circulates in the Root. I suppose the Deadlands' one is lava. I suppose Evergloam's one is Shadow, and liquid shadow is seen in the Ebonmere.
I suppose Hist Sap is the one of the little-known Hist Realm - and it is worth noting that the Saxhleel seem to still be atuned to that Sap, they are born in sap-filled pools, they return to the Hist after death and believe in reincarnation, which, if true, would make them effectively akin to Hist-attuned Daedra, in the sense that they reform from a fluid after death. I believe that even Sotha Sil, when he created His pocket clockwork realm, had to implement a chaotic creatia of His own: remember that Synthetic Oil that supposedly is present in all water of the Clockwork City and possibly impregnates every living being there.

According to the Speluncus Tamriellicum, there once was a network of caves on Nirn that was filled with Aedric energy, acting like pulsing capillaries of a living organism. This is very similar to Daedric Realms irrigated by Chaotic Creatia.

Nirn, however, is the Mortal plane. Those wo die there do not "reform" after death. That doesn't mean that Nirn doesn't have a weak, vestigial form of "chaotic creatia". And that, I think, is water.

According to Mankar Camoran's Commentaries, in an ancient, mythical past, the world was ruled by the Dreugh, which are marine creatures. The Song of Pelinal mentions that Umaril's father lived in a World-River. This seems to indicate that water was once of the utmost importance in Nirn. Maybe it once was a full-fledged Chaotic Creatia?
We know from the Halcyon Lake quest that Water is Memory, that it retains the memory of the formerly living. So in some sense, the Mer and Men do get back to "their" own chaotic creatia after death, they just don't come back from it. (This might be due to Nirn not having a Prince, as Lorkhan was split from His Divine Spark?)

So if we do assume that Water was once more potent than it is now, and that it is what filled the Nirnian capillaries, what does it say about Yaghra spawning from water?
Well, what if some of those Nirnian capillaries were still active, especially under Summerset? That would also mean that the Nirnian "Daedra" attuned to it could still use that "active water" as a way to get reincarnated after their death...
According to the Third Edition of the Pocket Guide to the Empire, the Sloads may have occupied the Summerset Isles before the Altmer. Was it during the time of the Dreugh Kingdom, when water was maybe still active? During that time, according to Vivec's 28th Sermon, Molag Bal was a king among the Dreughs, and was at that time "spiny and armored and made for the sea". This description closely match the Yaghra (actually, it matches them more than the Dreughs). So, what if Yaghra were the original inhabitants of Nirn?

The Yaghra are not the only creatures who can spawn from water though... When Psijic monks teleport, there is a splash of water. Heck, the entrance of their (corallian!) Ceporah Tower is a pool of water used as a portal. I don't think it is just for cool aesthetics, I think it is lorewise significant.
I think that the Psijics found a way to reattune themselves with still-active water, and can now use it as means of transportations, pretty much like K'Tora's Yaghra can. So... what if the Old Ways are exactly that? A water-filled network that can be used as a Way, and is Old because it dates back from when Nirn was water-attuned?

Also, if water used to be Chaotic Creatia, then it most probably has a very important role in Necromancy. That would explain why Sloads are dreaded necromancers. Also, Mannimarco is seen as the inventor of Necromancy (that is probably, the first Mer to achieve it - I do think the Sloads knew about it before). He led his research on the Traitor's Crypt, in Artaeum, where apparently, Water is still active. Maybe access to active-water was a key for him to make his breakthroughs?

So here is my hypothesis, fully articulated and summarized:

• Water used to be Nirnian Chaotic Creatia, that used to irrigate Nirn like blood in capillaries.
• The Dreughs, the Yaghra and the Sloads are remnants of ancient, Daedric-like civilizations that were attuned to this specific form of Chaotic Creatia.
• There still exists some sections of those "Nirnian capillaries" where water is active in the sense that it retains its ancient properties.
• One network of such "active capillaries" forms what the Psijic call "The Old Ways".
• Water still holds some role in Necromancy.

There are, of course, some flaws in this theory. For example... the Centaurs are supposed to be the "true followers of the Old Ways", yet they do not seem, at first glance, very linked to water.