Canonicity in all its glory.

The Hydra lived in a lake, in the depths of which was the entrance to the underground realm of the dead, guarded by it. An underground lake would also suit it perfectly... But that's up to you, who and where.

Although the Hydra looks really good in a swamp biome, along with the same Lizardmen from Fortress in the third game, Kappas, and Stream Spirits from Sanctuary in the sixth installment (I've written about this somewhere before).

I don't know... I think it should be something like this:
Assassin (invisibility, strike-back, poison, counterattack)
Hunter (ranged attack)
Dusk Witch (healing, melee)/Beholder (healing, ranged attack)
Minotaur (same as in the 6th game, but with slightly weaker stats)
Manticore (poison (basic), paralysis (upgrade), melee, counterattack)/Hydra (poison (basic), paralysis (upgrade), melee, counterattack, regeneration)
Faceless One (berserk (basic), mind control (upgrade), strike and return, counterattack)
Black Dragon (dragon's breath, resistance to darkness, 50% immunity to all other magic)

The Dusk Witch and the Faceless One, both are spellcasters. That's why I suggested leaving only one of them as an option.
Assassin, Hunter, Beast, Stalker, and other names can be reduced to something unified. Stalker, in my opinion, is very good. And let the ranged attacks be left to the Beholders.