Hello, Melissa,
A surprise trip to WDW, how priceless! Both water parks are loads of fun and favorites with my family. My sons and husband are partial to Typhoon Lagoon because the wave pool is incredibly strong; they love getting tossed around while I cower at the water's edge (I'm a wimp!). However, they are happy with whatever water park we visit; they are both equally enjoyable for all of us. And a tradition with both of them is to end of day at the water park with a visit to the donut kiosk, where mini doughnuts are made fresh (yum!).
While I haven't run into a many characters at the water parks, we have met up with Stitch and have some great pictures of my soaking-wet sons posing with him.
Shark Reef does not have a height restriction, but children under the age of 10 must be accompanied by an adult. You can request a life jacket, too, if you'd like. Your child would need to feel comfortable wearing a mask and using snorkeling gear, which was difficult for my sons when they were younger. Also, the water is significantly colder than the rest of the park, which can startle guests. There is an observation area that you could show your child what it will look like beforehand to see if s/he would like to try it. And don't worry if you get in the water and your child changes his/her mind; we've been there, done that!
Happy planning! Please let us know if we can help again.