1983-5:PLAYSETS
THE WATERFALL
With CASCADE: yellow earth pony with green mane and tail, cascading water symbol
OR
With SPRINKLES: lavender pegasus with blue mane and tail, blue ducks symbol
Thanks to Garej for the above Argos catalogue scan.

Just to confuse everyone, the Waterfall had several different editions. To keep it simple, we'll begin with the original Waterfall, circa 1983-4. This was sold in North America and is the one pictured above to the right -with the white cloud base. The pony sold with this playset was SPRINKLES, the pegasus shown sitting on it in the photograph. This version was also sold in parts of Europe. My boxed Waterfall is not accessible at present, but I believe the Sprinkles on the US box was an odd colour - more like a hybrid with Medley. But the pony sold inside was lavender.
In the UK, we had two releases of the Waterfall. BOTH releases featured a basic Waterfall that mirrored the US one in style but not in colour. The base for the UK sold Waterfall was green and this applies to both the original issue here and the second issue. Originally the waterfall was sold in the UK with Sprinkles (confirmation of this - I have a box flap with her on the green base in my box of stuff!) and then again in 1985-6 with a brand new pony, CASCADE. Cascade was, to my knowledge, only sold in the UK and only as part of this edition.
The Waterfall is easily damaged, especially the clips that hold the cloud to the rainbow and the rainbow to the base. There is a basic mechanism in place - you should be able to fill the pool of the base with water and there should be a pipe fixed up the back of the rainbow to the cloud. When you press the white button at the base of the rainbow, the cloud is meant to 'rain'.
The Waterfall also came with an attendant -the comically named DUCK SOUP who can be seen in the above photo.
The above picture is taken from the 1985 insert and features CASCADE. The Sprinkles edition never appeared on an insert, though she was more commonly associated with the set in comics, and Cascade had only one story outing (in the very first pony annual).